Public Comments received in response to the Consultation Paper on Amendments to IFSCA (Fund Management) Regulations, 2025

Public Comments on Consultation Paper on Amendments to IFSCA (Fund Management) Regulations, 2025 The Consultation Paper seeking comments/suggestions from the public on Amendments to IFSCA (Fund Management) Regulations, 2025 was issued by IFSCA on October 17, 2025. While some of the comments pertaining to certain issues, which were placed before the Authority in the meeting held on December 22, 2025, have been uploaded on the IFSCA website on January 21, 2026, the complete list of all comments/suggestions which were received are placed below: S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 1 40(1) Request to remove the proposed The 25% ceiling creates the following practical and 25% ceiling investments by challenges: 2(1)(d) Associates. Master-Feeder fund structures: The proposal and Request to provide a carve- restricts participation of FMEs and their out for feeder funds from the associates in funds to either (i) 10% of the fund’s definition of Associates. corpus, unless the FME and its associates are non-resident and the fund invests no more than one-third of its corpus in a single investee company and its associates, or (ii) 25% of the fund’s corpus if the fund does not invest in India. Currently, IFSCA regulations do not impose such a restriction, provided that the ceiling of 10% does not apply to FMEs or their associates whose ultimate beneficial owners are non-residents and no more than one-third of the fund’s corpus is invested in a single investee company and its associates. Effectively, the proposed framework would limit FME and associate participation to 25% in IFSC- based funds in all other cases. This represents a significant departure from the current position, which imposes no such restriction on FME participation. We respectfully submit that this proposal could inadvertently impact feeder funds investing in IFSC-based funds. Many feeder funds in overseas jurisdictions are structured as companies or corporate entities and may be classified as “associates” of the FME. Consequently, they could fall under the proposed 25% ceiling, limiting their ability to contribute to IFSC-based funds. To ensure GIFT City remains a competitive and flexible fund jurisdiction, regulations should not restrict the flow of global capital into IFSC-based funds through feederS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) structures that may be considered associates due to management or operational affiliations with the FME. GIFT City is at a pivotal stage of development. Unlocking its full potential requires that offshore fund managers perceive IFSC as a flexible jurisdiction where they can channel overseas capital without regulatory impediments. We suggest that the Authority consider an exemption from the proposed 25% limit for FMEs and their associates whose ultimate beneficial owners are non-residents of India. Fund launching challenges: Limiting associate participation to 25% would require 75% of the fund corpus to be raised from external investors before the first close. For example, a USD 50 million fund would be restricted to raising only USD 12.5 million from associates, necessitating USD 37.5 million from external investors upfront. Emerging fund managers often rely on initial commitments from associates to demonstrate credibility and skin-in-the-game to attract external investors. Imposing this requirement could delay first closes and create operational challenges for new funds. Impact on existing FMEs: We respectfully submit that regulations should be progressive and provide certainty to existing and prospective market participants. Many FMEs have established funds based on the current regulatory framework, and restrictive amendments would necessitate substantial restructuring of existing funds. Frequent regulatory changes that impose stricter limits than the current provisions could generate market uncertainty and put GIFT City at a competitive disadvantage. Investors and fund managers require regulatory stability when making long-term investment decisions and commitments. Impact on strategic investors: The proposed 25% ceiling may discourage institutional investors, family offices, and anchor investors who typically commit 25–50% of a fund’s corpus to demonstrate confidence in the fund manager and alignment with the fund’s strategy.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) International Comparison Based on our understanding, other leading jurisdictions do not impose numerical ceilings on associate investments in private funds, including India (SEBI AIFs), Singapore (MAS), Dubai (DFSA), Abu Dhabi (FSRA), Mauritius (FSC), and the United States (SEC). We respectfully submit that the current safeguards in GIFT-IFSC, such as the sophisticated investor base and the requirement for 75% investor approval, already provide robust investor protection while preserving the jurisdiction’s competitiveness. While we understand and support the Authority’s objective to encourage greater FME participation in non-India schemes, the proposed 25% ceiling may inadvertently create practical obstacles to achieving this goal. 2 New It is suggested to Insert a new The proposed insertion formally recognizes the Regulati Regulation under Chapter VIII use of authorised Payment Service Providers on (General Obligations and (PSPs) by FMEs for receipt and disbursement of Responsibilities): investor funds and promotes operational Use of “Use of Payment Service efficiency, ensures alignment with the IFSCA Payment Providers (Payment Services) Regulations, 2024, and Service A FME and its schemes may use supports the adoption of regulated digital Provider the services of a Payment Service payment infrastructures while maintaining s Provider (PSP), as defined under supervisory oversight and investor protection. the IFSCA (Payment Services) Instant Liquidity & Settlement: Funds collected Regulations, 2024, for receipt of are pooled and settled instantly to the RE’s investor account post drawdown, helping optimize commitments/subscriptions, working capital. payment of • Named Account Compliance: PSPs can issue redemptions/distributions to named accounts to REs, allowing remitters investors, and collection of and counterparties to transfer funds directly to management/performance fees the RE’s name, fully aligned with regulatory and scheme expenses expectations for account-level traceability. • Built-In Compliance Management System: PSPs can offer an automated, cost-efficient mechanism within its payment services to comply with AML and source account ownership verification obligations of such entities. Specifically, PSPs are capable of verifying that the remitting account is owned by the same user prior to the credit of funds being credited to the Named Account of theS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) RE and fulfils the third-party verification obligation of the REs. This feature enables REs to discharge their third-party verification responsibilities seamlessly. Thereby enhancing ease of doing business and ensuring regulatory compliance with minimal manual effort. • Segregation of funds: PSPs can handle funds on behalf of merchants through dedicated PSP escrow accounts ultimately held with IBUs that are segregated from PSP’s own funds. Merchants are also able to access ledger wise statements of activity of their transactions with PSP through the multi- currency payment accounts issued by us (both credit and debit). • Optimize transactional activity: Through payment accounts issued by PSP, merchants are able to undertake time critical disbursements within IFSC or outside through funds collected in the multi-currency accounts and minimize transactional hops. • Automated Reconciliation & Audit Trail: Each transaction is traceable to the remitter, with real-time lifecycle updates and system-level reconciliation, improving compliance and internal controls. • Multi-Currency Efficiency: REs can collect, store, and convert funds across all GIFT- permitted currencies, leveraging the PSP’s multi-currency account infrastructure and competitive FX routing. • Programmable & API-Driven: If required PSPs can implement event-based payout structures, programmable disbursements, and real-time compliance checks are built-in, enabling new product innovation and lower friction for regulated activities. 3 77 It is suggested to insert a new sub- The suggested amendment clarifies that FMEs regulation after 77(2)(d): may maintain client accounts with authorized A specific payment account with PSPs. This removes ambiguity between PSP and Payment Service Providers traditional bank accounts, ensures compliance (PSPs) authorised under the when modern payment rails are used. IFSCA (Payment Services) Regulations, 2024S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 4 2(1) It is suggested to Insert cross- Cross-referencing the definition of “Payment reference definitions to ensure Service Provider” to the IFSCA (Payment consistency: Services) Regulations enhances consistency “ ‘Payment Service Provider’ shall across regulatory frameworks. This avoids have the meaning assigned to it definitional drift, ensures regulatory clarity, and under the IFSCA (Payment establishes a unified supervisory perimeter for Services) Regulations, 2024.” payment-related activities conducted by FMEs. 5 3rd Add a sentence to clause (i): The proposed addition ensures that client funds Schedule “Where a Payment Service remain ring-fenced from FME’s operational , Part A - Provider is used, the FME shall accounts, maintaining parity with traditional Fair ensure that investor monies are at banking arrangements and strengthening dealing & all times segregated from the investor protection in the context of modern segregati FME’s own funds and credited to payment mechanisms. on the scheme’s payment clauses account(s)with a PSP in IFSC in accordance with the Payment Services Regulations.” 6 22(1) Please consider revising the A prescriptive list of securities which is limited to language as follows: bank deposits may be unnecessarily restrictive Provided further that any monies and may therefore result in operational difficulties received from the contributors for the schemes. IFSCA may consider the above prior to the first close of the draft language, which will offer sufficient flexibility scheme shall be temporarily while ensuring liquidity to the scheme. deployed only in bank deposits with option for premature withdrawal and / or any liquid debt securities or money market instruments where there is no lock in and are redeemable without requiring prior notice. 7 23(3)(iii) Please consider revising the The draft language proposed in the consultation language as follows: paper inadvertently implies that the scheme's The contribution by the scheme in post-issue beneficial interest in the Investee any subsequent round should be Company must be exactly equal to its pre-issue limited to the extent that the post- beneficial interest and thereby does not account issue beneficial interest (on a fully for situations in which the scheme may not want diluted basis) of the scheme in that to or may not be able to participate in the relevant investee company remains the round to the full extent. same as does not exceed its pre- issue beneficial interest (on a fully Please consider the same suggestion with diluted basis) therein. respect to the similar amendments proposed for Restricted Schemes (Regulation 34 (1)) and Retail Schemes (Regulation 46 (1)). 8 23(6) Please consider revising the The reference to the term 'pari-passu' should be language as follows: replaced with the term 'pro-rata' given that theS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) The rights of the investors in the intent is to ensure that rights of the investors in distributions from a Venture distributions are commensurate with / linked to Capital scheme shall be pari their respective invested amounts. 'Pari-passu' is passu in all aspects and in the defined as "proportionally; at an equal pace; same proportion as the pro-rata to without preference" under Black's Law Dictionary the amounts invested by them, (11th Edition). It is not possible for schemes to except in the cases of excuse and ensure that all investors are equal in the context exclusion as per the placement of distributions given the effect of difference in memorandum, differential hurdle rates, additional return charged, etc. management fees, differential across different classes of investors / units. additional return, special schemes for co-investment as per the Additionally, upfront carve outs for permissible placement memorandum or differential economics common in fund structures contribution agreement, or in such would be helpful for industry clarity. cases and in such manner as may be specified by the Authority. Please consider the same suggestion with respect to the similar amendments proposed for Restricted Schemes (insertion proposed at Regulation 35 (6) and 35(7)). 9 28(1) Please consider revising the The monetary cap of USD 750,000 provides language as follows: great clarity and reasonable limitations with Under a Venture Capital scheme, respect to the ceiling applicable to an FME's the FME or its associate shall commitment to a scheme. The language invest an amount which shall be at proposed in the consultation paper would make it least 2.5% of the corpus and or mandatory for the FME to put a minimum of 2.5% USD 750,000, whichever is lower, (unless waived by investors) and takes away the provided such contributions shall flexibility of capping their statutory minimum to not exceed 10% of the corpus. 750,000. For larger funds minimum of 2.5% without the cap of USD 750,000 could translate to substantial amount which can put more strain on the FME and increases the cost of doing business. The GP may want to show their skin in the game by putting some of their own capital at risk for which USD 750,000 may be sufficient and for which they do not need to go for a waiver from LPs but otherwise for a large fund 2,5% could translate to a substantially large amount. May be the intent was more to cap the FME and affiliate participation to 10% without changing the current construct. The proposed language should help one achieve this.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 10 40(1) Please consider revising the Same rationale as given above. language as follows: Under a restricted scheme, the FME or its associate shall invest: (a) In case of a close ended scheme, at least 2.5% of the corpus and or USD 750,000, whichever is lower, subject to such contribution not exceeding 10% of the corpus. (b) In case of an open-ended scheme, at least 5% of the corpus and or USD 1,500,000, whichever is lower, subject to such contribution not exceeding 10% of the corpus. 11 40(4)(c) Please consider revising the language as follows: Provided that for such scheme in IFSC there is no active management undertaken by the FME and the details of inter-se allocation of the underlying schemes are disclosed in the placement memorandum of the scheme. Provided further that any co-investment opportunities offered to the investors of such scheme through a separate class of units in accordance with co- investment opportunities offered by the underlying schemes will not disqualify such fund of funds scheme from availing the exception offered under this Regulation 40(4)(c). 12 23(6), The rights and distributions of Owing to differential fee/Additional Return 35(6), investors should be pari-passu to Arrangements investors of different classes may 35(7) their NAV or beneficial interest in have a different beneficial interest with the the fund and NOT their investment passage of time even though they invested the same amount at the start of the fund. Moreover, in an open ended fund, investors investing later, at a time when the NAV of the fund has risen, will receive a lower beneficial interest than an investor who invested at a lower NAV,S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) even though the amounts invested may be the same. As worded, two investors with different NAVs, who entered the fund at different points of time, with different classes would have to be distributed the same amount just because they invested the same amounts. Stepping back, blanket pari passu language risks having various unintended consequences, especially with respect to both non-monetary rights and calculation methodologies that are commercially standard between LPs and fund managers. We would urge caution and more detailed consultation before these are implemented. As an illustration, a similar regulation passed by SEBI last year for AIFs has required significant post-circular industry consultations, and the myriad issues emanating from that circular have not yet been resolved. Given the varied ways in which funds are contracted with their LPs (including in PE/VC vs public market funds), it has required other means such as industry standard setting bodies onshore. 13 23(5) Differential rights may not all be Large investors may negotiate information rights, explicitly disclosed in PPM etc. that cannot be foreseen when writing the PPM. Enabling language should suffice. 14 40(1)(b) It is suggested that in open ended 1. In open-ended schemes with dynamic inflows fund, the requirement for and outflows, the corpus changes frequently. maintaining a contribution of at Requiring the FME to continuously adjust its least 5% and not exceeding 10% investment to maintain a fixed percentage of the corpus be suitably modified contribution becomes operationally to prescribe a definite minimum burdensome and diverts working capital that amount of contribution by the could otherwise support business growth. FME. The proposed framework, 2. Continuous contributions can strain liquidity which mandates the maintenance and impact the FME’s cash flow. of a fixed percentage of the corpus 3. For FMEs or associates that are Indian as contribution on an ongoing residents, each contribution could trigger basis, poses practical and FME’s contribution thereby requiring operational challenges, additional compliance under RBI’s FEMA particularly in view of the Regulations, thereby increasing continuous fluctuation of the administrative & compliance burden. corpus amount arising fromS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) investor subscriptions and 4. Further, there are certain restrictions under redemptions FEMA regulations (for example: LRS and Overseas Investments Limit) that may impact Indian FMEs to further contribute. 15 40(1) 40 (1) Under a restricted scheme, a. Each prior restricted scheme's structure was the FME or its associate shall disclosed and agreed upon by investors. invest:- b. Schemes launched prior to the introduction (a) In case of a close ended were structured, marketed, and capitalized under scheme, the prior rules, in good faith, based on the then- (i) at least 2.5% and not exceeding applicable requirements. Imposing the new 10% of the corpus; minimum investment retrospectively could (b) In case of an open ended potentially disadvantage existing schemes and scheme, disrupt contractual expectations for both (i) at least 5% and not exceeding managers and investors. 10% of the corpus; c. This does not undermine the regulatory Our suggestion: objectives of the FME contribution rule, which is Grandfathering clause: to ensure ‘skin in the game’; all new schemes will Notwithstanding the provisions of comply, and historic schemes can maintain Regulation 40(1), this clause shall continuity without forced amendments. not apply to any scheme that was d. Exemptions for historic schemes are standard established prior to the effective practice in regulatory amendments, both in India date of this regulation, provided and globally, particularly in fund management, that such scheme had invested where investor protection and orderly market less than 2.5% of its corpus in the operation are top priorities. manner specified under Regulation 40(1)(a)(i) or Regulation 40(1)(b)(i), as applicable. For the avoidance of doubt, the restrictions set forth in Regulation 40(1) shall only apply prospectively to schemes established on or after the effective date of this regulation and shall not be construed to impose any retroactive obligations or liabilities on schemes that were compliant with the investment norms in force at the time of their establishment.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 16 36(3) The existing provisions under The frequency for NAV disclosure is currently Regulation 36(3) mandate linked to the fund structure (open-ended vs. monthly NAV disclosure for open- close-ended) rather than the category of the AIF. ended funds and half-yearly NAV Therefore, the proposed flexibility to extend the disclosure for close-ended funds. NAV disclosure period should similarly be aligned The proposed proviso provides with the fund structure (open ended vs. close flexibility to extend the half-yearly ended). NAV disclosure to annual Extending this flexibility to all close-ended funds disclosure with the consent of 75% will ensure regulatory consistency, reduce of investors, but this flexibility is compliance burden, and maintain parity across currently limited to Category I and fund categories while retaining investor consent Category II AIFs. safeguards. Suggestion: The flexibility to extend the disclosure frequency from half-yearly to annual should be made applicable to all categories of close-ended funds, irrespective of their classification (Category I, II, or III). Suggested text: Provided that six months period in case of the close ended funds may be enhanced to one year with prior approval of at least seventy-five per cent. (75%) investors in the scheme by value of their investments.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 17 3rd ixa) ensure before the first close of Aligning these timelines with practical fund Schedule any scheme that it has, - operations ensures regulatory compliance while : Code of avoiding undue administrative burden. Conduct (a) appointed auditors to audit its For Auditor, PPMs typically specify eligibility (e.g., obligatio accounts; Big 4/Big 6). Allowing submission of three names ns (c) appointed independent valuer pre-close provides regulatory comfort while for valuation of the portfolio of enabling practical flexibility. scheme; Valuer is generally decided basis the type of (d) appointed the custodian for investment / type of securities invested. the scheme, if applicable in terms Accordingly, we request to agree that before first of regulation 132. close FME can share list of three valuers out of which one valuer will be selected post first close Suggestion: (a) For auditors: FME before the valuation exercise is conducted. may provide names of three Further, since close ended funds are mandated eligible auditors before the first to appoint Custodian only upon AUM crossing close, from which one will be USD 70 mn, Custodian appointment should be appointed post-first close. made applicable within 3 months from the end of (b) For independent valuers: FME the quarter in which AUM crosses USD 70 million may provide names of three independent valuers before first close, with final appointment post- first close. (c) For close-ended funds: Custodian to be appointed within three months from the end of the quarter in which AUM crosses USD 70 million. 18 40 (4) & We would like to submit that the In case of fund of funds scheme investing in the 52 (1) proposed proviso to the exemption scheme (s) with similar requirements of skin in Insertion to FME Contribution in case of the game, such additional conditions should not of new Fund of Fund(s) scheme should be proposed as in the underlying scheme there is proviso not be included in the Regulation. already a contribution made for the same.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 19 Insertion We would like to submit following We would like to submit that the board of directors of new revised text of the provision: or designated partners or trustees of the FME provision (o) For all the policies, may delegate their powers to appropriate frameworks, plans, by whatever authorised committee or designated senior name called, that the FME management official (s) for approving the prepares in compliance with these policies, frameworks, plans, etc. Accordingly, regulations, approval from the revised text has been proposed. board of directors or designated partners or trustees or from the appropriate authorised committee or designated senior management official(s) to whom such power have been delegated by such fiduciaries, as may be the case, of the FME shall be obtained prior to their implementation or amendment. 20 5 As per the current Regulations, a Ease of Doing Business branch structure is permitted only There are a number of entities, both domestic for a FME that is already and foreign, which are regulated by a financial registered or regulated by a sector regulator (either in or outside India) and financial sector regulator in India have the operational capability, technical or a foreign jurisdiction for expertise, and institutional infrastructure conducting similar activities. necessary to carry out fund management activities in GIFT IFSC. However, the phrase “for conducting similar activities” is not Further, some of these entities are already defined under the Regulations, engaged in security market related activities by which creates an ambiguity for undertaking proprietary trades as well as entities which are regulated and engaged in access products (such as issuing of engaged in capital markets (but offshore derivative instruments to clients) not holding a specific fund business. management license) to set-up a branch in GIFT IFSC. However, due to legal/ regulatory/ strategic considerations, setting up a separate entity is a Therefore, for ease of doing cumbersome process for them. As these entities business, it is proposed to amend are appropriately regulated, involved in capital the regulations to allow these markets, equipped with necessary experience, entities to operate as a branch infrastructure and skill set, they should be structure in GIFT IFSC to carry out allowed to operate in GIFT IFSC through a fund management activities. branch to conduct the fund management activities. The proposed amendment would:S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) Proposed Regulation • Remove subjectivity and ambiguity around the interpretation of “similar activities.” “5. (1) The applicant shall be set • Widen the eligibility for setting up a branch in up in IFSC in the form of a GIFT IFSC by domestic/ foreign regulated company or LLP or branch thereof entities including the participation of globally or any other form as may be reputed institutions that are regulated but not permitted by the Authority: necessarily engaged in similar activities in their home jurisdiction. Provided that a Registered FME (Retail) shall not be permitted in the form of an LLP or branch • Promote ease of doing business in line with thereof: the IFSCA’s mandate to develop a robust and internationally aligned fund management Provided further that the branch ecosystem in GIFT IFSC. structure is permitted only for a FME an applicant which is already registered or regulated by a financial sector regulator in India or a foreign jurisdiction for conducting similar activities. 21 35(1) As per the current Regulations, in Ease of Doing Business case of a open-ended scheme, the The proposed amendment will align India with maximum investment in unlisted the global movement towards Fund Managers securities should not exceed providing liquidity windows in PE/VC funds. twenty-five per cent. (25%) of the corpus of the scheme. This will also kickstart creation of several open- ended private equity funds in IFSC, involving In order to attract more investment potentially other asset classes, where fund in PE/VC funds, it is proposed to managers create structures to provide liquidity to remove the 25% cap on investors where they could not provide liquidity investment in unlisted securities under traditional arrangement for open-ended private equity (PE) schemes. This will redirect similar strategies away from other global booking centres (like Singapore, Mauritius etc) and into GIFT IFSC. 22 30(2) As per the current Regulations, a Ease of Doing Business Restricted Schemes (Non-Retail The proposed amendment will align Funds in Schemes) registered as Category GIFT IFSC with global standard allowing II Alternative Investment Fund flexibility in terms of Investment Strategies. shall be a close ended Fund. Open-ended nature simply allows investors to redeem at will, whereas applicable taxes and It is proposed to allow a Restricted processes would be same as ‘distributions made Schemes (Non-Retail Schemes) to investors’ under close-ended scheme registered as Category IIS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) Alternative Investment Fund to have an open-ended nature, provided that the investment strategy is equipped to manage continuous inflow and outflow requirements. Proposed Regulation 30 (2) The schemes covered under clauses (a) and (c) of sub- regulation (1) shall be filed before the Authority as a close-ended scheme and those covered under clause (b) and (c) shall be filed before the Authority either as a close-ended scheme or an open- ended scheme. Provided that Category II Alternative Investment Fund can be open ended only in case where the investment strategy of the AIF is equipped to manage continuous inflow and outflow requirements. 23 107E Allowing the Principal Officer (PO) Ease of Doing Business of the hosting FME to oversee It is proposed to relax the requirement to appoint third-party strategies under separate Principal Officer for each strategy Platform Play, instead of under ‘Platform Play’ mechanism. mandating a separate PO for each strategy. While the objective of the ‘Platform Play’ mechanism is to provide fund managers with a Proposed Regulation cost-effective way to test their strategies using the existing platform, requiring the appointment 107E. (1) For each scheme of a separate Principal Officer could be a managed under the third-party hinderance. fund management arrangement, In such a scenario, the Principal Officer and the Principal Officer of the FME Compliance Officer of the existing FME can shall appoint a dedicated person ensure regulatory supervision and compliance. as the Principal Officer who shall be responsible for the overall This issue could address the talent crunch in activities with respect to that GIFT IFSC that create potential bottlenecks and scheme, including but not limited hence, we are proposing to relax the criteria. to fund management, risk management and compliance.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 24 107G Increase the corpus limit for third- Ease of Doing Business party schemes from USD 50 It is proposed to increase the corpus limit under million to USD 100 million. third-party fund management arrangement to USD 100 million as current cap seems restrictive Proposed Regulation for large family offices and institutional investors evaluating the Platform Play model. 107G.(1) A FME shall manage Restricted Schemes under third- Increasing the limit will make the model more party fund management commercially viable and attract higher-quality arrangement in accordance with fund sponsors. and in the manner as specified under Part B of Chapter III of these regulations: Provided that such scheme does not exceed the corpus of USD 50 100 million or such other value as may be specified by the Authority. 25 107G Address the Family Offices looking Ease of Doing Business to utilise the structure Currently, regulations do not explicitly address Proposed Regulation Family Offices planning to utilise Third Party 107G(1) A FME shall manage Fund Management Structure. Restricted Schemes or Family Investment Fund under third-party Family Offices (especially non-residents) find it fund management arrangement in difficult to establish offices in GIFT IFSC given accordance with and in the it’s a new jurisdiction for them. manner as specified under Part B of Chapter III of these regulations This gap can be addressed by formally allowing and Part C of Chapter VI of these existing FMEs to set-up FIFs for their large regulations. clients under Third Party Fund Management arrangement.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 26 107K Introduce a shared responsibility Ease of Doing Business framework where certain Currently obligations of the FME are equivalent obligations are also assigned to as for its self-managed schemes. the third-party investor. However, when third-party/Family Office/ Client 107K. (1) It shall be the joint duty is also involved in investment decisions, relevant of the FME and third party fund obligations should also be applicable to said manager, Family office to ensure third-party/ investor. that- For example, the third party/ Family Office (a) the third-party meets the should be responsible for security selection eligibility criteria as specified where FME has no view or opposite view, while under regulation 107H; the FME would be responsible for regulatory (b) the schemes set up by the FME reporting, KYC/AML/CTF checks and other day- under the third-party fund to-day requirements management arrangement are A shared responsibility model will ensure better treated to be the schemes of the alignment of accountability FME; The risks can be mitigated through enhanced (c) the liability of the FME towards disclosures, and governance norms. any Restricted Scheme and its investors is not affected due to the third-party fund management services;(d) the third party is qualified and capable of undertaking the entrusted functions, and that such third-party was onboarded with due care and caution; (e) the activities undertaken by the third-party are monitored by the FME and in doing so, the FME may issue such instructions to such third-party as it may deem necessary; (f) the third-party fund management arrangement enables the FME to terminate the arrangement at any time, in the interest of investors or on the directions of the Authority; (g) it reviews the services rendered by each third-party on an ongoing basis and periodically shares these reports with the respective fiduciaries; (h) a suitable indemnity mechanism is in place whichS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) requires the third-party to indemnify the FME from any potential liabilities arising from the funds managed under the third- party fund management arrangement; (i) it pays such fees within such timelines as specified by the Authority, and (j) such other requirements as may be specified by the Authority. (2) The FME shall be responsible for all the acts of omissions and commission of the third-party in relation to the third-party fund management services. 27 2(1)(d) The current Regulations requires Ease of Doing Business the FME in GIFT IFSC to have a The requirement for Sponsor or FME skin-in-game in the GIFT Fund. commitment is fundamentally about aligning Regulation 40 of the said interests, ensuring that the promoter/manager Regulations specifies the has a meaningful stake or risk, thereby providing minimum and maximum amount comfort to investors. which can be invested by FME or its ‘associate’ as ‘sponsor The present definition permits sponsor commitment’. commitment either from FME or associate who is However, the term ‘associate’ is directly related with the FME (shareholding or defined in the IFSCA Regulations directorship criteria). in a restrictive manner and does In a large group, affiliates or sister companies not includes any commitment from may share treasury, risk-management, group entities. compliance, technology infrastructure, and It is, hereby, proposed to amend governance oversight through the ultimate the definition of the term parent. ‘associate’ to inter alia include any Although shareholdings may not exactly meet the company or a limited liability 20% threshold between the FME and each partnership or a body corporate affiliate, the group as a whole often acts as an which is within the same corporate integrated economic entity. group as the FME (i.e., both are under a common ultimate parent Allowing group entities (which are under common company). ultimate parent) to count for this commitment means that the relevant economic group can collectively demonstrate commitment, rather than restricting to only the FME’s direct investment. This is especially relevant for large groups, where the Sponsor or FME may be one entity, butS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) backing may come from related group entities (treasury, holding company, affiliates). This shall enhance the depth of commitment and ability to meet thresholds and thereby strengthens investor confidence. Many global fund jurisdictions often adopt definitions of “group” or “group-entity” when dealing with related parties and skin-in-the-game, recognising that financial groups operate via multiple vehicles and affiliates. Incorporating an expanded group-entity definition would help align the IFSC regime with international norms, making the regime more attractive to global fund sponsors and institutional groups. 28 135 Regulation 135. (1) Every scheme The governance framework of investment launched by FME shall have the manager where government or government annual statement of accounts related investors (such as sovereign wealth funds audited by an auditor who is not in and other strategic long-term equity and any way associated with the FME. institutional investors) are shareholders is widely Provided that such requirement regarded as significantly stronger than that of shall not be applicable for the other investment managers. below Further, government or government related a) FMEs in which Government or investors (such as sovereign wealth funds and Government related investors other strategic long-term equity and institutional such as central banks, sovereign investors) may participate as investor in scheme wealth funds, international or or underlying scheme in case of fund of funds multilateral organizations or scheme. Such funds are classified as large value agencies own at least twenty-five funds, designed to deliver scale, stability and per cent. (25%) directly or robust governance, thereby creating an attractive indirectly; or platform for substantial institutional participation. b) Scheme in which Government or Government related investors Accordingly, in the above scenarios, requirement such as central banks, sovereign of appointing different auditors for FME and wealth funds, international or scheme should be relaxed. multilateral organizations or agencies own at least twenty-five per cent. (25%) directly or indirectly; or c) fund of funds scheme in which Government or Government related investors such as central banks, sovereign wealth funds, international or multilateral organizations or agencies own atS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) least twenty-five per cent. (25%) directly or indirectly in the underlying scheme. 29 30(2) As per the current Regulations, a Ease of Doing Business Restricted Schemes (Non-Retail Schemes) registered as Category This will align GIFT IFSC funds with global II Alternative Investment Fund standard allowing flexibility in terms of Investment shall be a close ended Fund. Strategies. Open-ended nature simply allows investors to It is proposed to allow a Restricted redeem at will, whereas applicable taxes and Schemes (Non-Retail Schemes) processes would be same as ‘distributions made registered as Category II to investors’ under close-ended scheme Alternative Investment Fund to have an open-ended nature, provided that the investment strategy is equipped to manage continuous inflow and outflow requirements. Proposed Regulation 30 (2) The schemes covered under clauses (a) and (c) of sub- regulation (1) shall be filed before the Authority as a close-ended scheme and those covered under clause (b) and (c) shall be filed before the Authority either as a close-ended scheme or an open- ended scheme. Provided that Category II Alternative Investment Fund can be open ended only in case where the investment strategy of the AIF is equipped to manage continuous inflow and outflow requirements.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 30 35(1) As per the current Regulations, in Ease of Doing Business case of an open-ended scheme, the maximum investment in The proposed amendment will align India with the unlisted securities should not global movement towards Fund Managers exceed twenty-five per cent. (25%) providing liquidity windows in PE/VC funds. of the corpus of the scheme. This will also kickstart creation of several open- In order to attract more investment ended private equity funds in IFSC, involving in PE/VC funds, it is proposed to potentially other asset classes, where fund remove the 25% cap on managers create structures to provide liquidity to investment in unlisted securities investors where they could not provide liquidity for open-ended private equity (PE) under traditional arrangement. schemes This will redirect similar strategies away from other global booking centres (like Singapore, Mauritius etc) and into GIFT IFSC. 31 107E. Allowing the Principal Officer (PO) Ease of Doing Business of the hosting FME to oversee third-party strategies under It is proposed to relax the requirement to appoint Platform Play, instead of separate Principal Officer for each strategy under mandating a separate PO for each ‘Platform Play’ mechanism. strategy. While the objective of the ‘Platform Play’ Proposed Regulation mechanism is to provide fund managers with a cost-effective way to test their strategies using 107E. (1) For each scheme the existing platform, requiring the appointment of managed under the third-party a separate Principal Officer could be a fund management arrangement, hinderance. the Principal Officer of the FME shall be responsible for the overall In such a scenario, the Principal Officer and activities with respect to that Compliance Officer of the existing FME can scheme, including but not limited ensure regulatory supervision and compliance. to fund management, risk management and compliance. This issue could address the talent crunch in GIFT IFSC that create potential bottlenecks and hence, we are proposing to relax the criteria. 32 107G Increase the corpus limit for third- Ease of Doing Business party schemes from USD 50 million to USD 100 million. It is proposed to increase the corpus limit under third-party fund management arrangement to Proposed Regulation USD 100 million as current cap seems restrictive for large family offices and institutional investors 107G.(1) A FME shall manage evaluating the Platform Play model. Restricted Schemes under third- party fund management Increasing the limit will make the model moreS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) arrangement in accordance with commercially viable and attract higher-quality and in the manner as specified fund sponsors. under Part B of Chapter III of these regulations: Provided that such scheme does not exceed the corpus of USD 100 million or such other value as may be specified by the Authority. 33 107G.(1) Address the Family Offices looking Ease of Doing Business to utilise the structure Currently, regulations do not explicitly address Proposed Regulation Family Offices planning to utilise Third Party Fund 107G.(1) A FME shall manage Management Structure. Restricted Schemes or Family Investment Fund under third-party Family Offices (especially Non-Residents) find it fund management arrangement in difficult to establish offices in GIFT IFSC given it’s accordance with and in the a new jurisdiction for them. manner as specified under Part B of Chapter III of these regulations This gap can be addressed by formally allowing and Part C of Chapter VI of these existing FMEs to set-up FIFs for their large clients regulations. under Third Party Fund Management arrangement. 34 107K Introduce a shared responsibility Ease of Doing Business framework where certain obligations are also assigned to Currently obligations of the FME are equivalent the third-party investor. as for its self-managed schemes. Proposed Regulation 107K. (1) It shall be the joint duty However, when third-party/Family Office/ Client is of the FME and third party fund also involved in investment decisions, relevant manager, Family office to ensure obligations should also be applicable to said that- third-party/investor. (a) the third-party meets the eligibility criteria as specified For example, the third party/ Family Office should under regulation 107H; be responsible for security selection where FME (b) the schemes set up by the FME has no view or opposite view, while the FME under the third-party fund would be responsible for regulatory reporting, management arrangement are KYC/AML/CTF checks and other day-to-day treated to be the schemes of the requirements. FME; (c) the liability of the FME towards A shared responsibility model will ensure better any Restricted Scheme and its alignment of accountability. investors is not affected due to the The risks can be mitigated through enhanced third-party fund management disclosures, and governance norms. services;(d) the third party isS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) qualified and capable of undertaking the entrusted functions, and that such third-party was onboarded with due care and caution; (e) the activities undertaken by the third-party are monitored by the FME and in doing so, the FME may issue such instructions to such third-party as it may deem necessary; (f) the third-party fund management arrangement enables the FME to terminate the arrangement at any time, in the interest of investors or on the directions of the Authority; (g) it reviews the services rendered by each third-party on an ongoing basis and periodically shares these reports with the respective fiduciaries; (h) a suitable indemnity mechanism is in place which requires the third-party to indemnify the FME from any potential liabilities arising from the funds managed under the third party fund management arrangement; (i) it pays such fees within such timelines as specified by the Authority, and (j) such other requirements as may be specified by the Authority. (2) The FME shall be responsible for all the acts of omissions and commission of the third party in relation to the third-party fund management services 35 135(1) Seeking relaxation with reference Ease of Doing Business, Clarification to appointment of an auditor in case of a branch. We seek relaxation by virtue of adding the proviso Proposed Regulation to this regulation in the case of branch, which operates under the aegis of parent entity. GivenS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 135. (1) Every scheme launched the branch’s limited operational autonomy and its by FME shall have the annual integration with the parent entity’s governance statement of accounts audited by and compliance framework, we propose to an auditor who is not in any way appoint an auditor who is associated with the associated with the FME. parent entity but maintains independence from the branch’s day-to-day operations. Provided that in the case of a branch of the FME, the annual This request is made in alignment that allows statement of accounts of the such an appointment in case of a branch, and we scheme may be audited by an assure that the auditor will uphold professional auditor who is associated with the standards of independence and objectivity in parent entity of such branch, conducting the audit. notwithstanding the general requirement of independence under sub-regulation. 36 40 Grandfathering clause to be added a. Each prior restricted scheme's structure was in the existing provision disclosed and agreed upon by investors. Notwithstanding the provisions of b. Schemes launched prior to the introduction Regulation 40(1), this clause shall were structured, marketed, and capitalized under not apply to any scheme that was the prior rules, in good faith, based on the then- established prior to the effective applicable requirements. Imposing the new date of this regulation, provided minimum investment retrospectively could that such scheme had invested potentially disadvantage existing schemes and less than 2.5% of its corpus in the disrupt contractual expectations for both manner specified under managers and investors. Regulation 40(1)(a)(i) or c. This does not undermine the regulatory Regulation 40(1)(b)(i), as objectives of the FME contribution rule, which is applicable. to ensure ‘skin in the game’; all new schemes will comply, and historic schemes can maintain For the avoidance of doubt, the continuity without forced amendments. restrictions set forth in Regulation d. Exemptions for historic schemes are standard 40(1) shall only apply practice in regulatory amendments, both in India prospectively to schemes and globally, particularly in fund management, established on or after the where investor protection and orderly market effective date of this regulation operation are top priorities. and shall not be construed to impose any retroactive obligations or liabilities on schemes that were compliant with the investment norms in force at the time of their establishment.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 37 40 & It is suggested to allow FME or its The FME's initial 100% investment serves as a 52(1) Associates to invest 100% in the strong signal of confidence in the scheme's Scheme as Own Capital in the strategy. However, the subsequent reduction Scheme and announce first close proves the FME's ability to attract third-party, to start the business operations arms-length capital, validating the fund's market along with a condition on the appeal and viability. FME/Associate to reduce its own capital to maximum 25% of the This initial Investment of 100% by FME will help Corpus within three years from the build the track record as soon as possible to date of commencement of expand the investor base. Please refer to the Scheme. advantages of starting the fund sooner in point 3 above. 38 Other It is suggested to encourage more Suggesti Developers in the SEZ area; as it ons will allow Fund Manager Entity to (Non- speed up having physical Regulato presence in IFSC jurisdiction. ry) 39 Other It is further suggested if IFSCA Suggesti conducts roadshows in different ons countries like US, Canada, (Non- Singapore etc to create Regulato awareness of Investment ry) Opportunities in Gift City. 40 Other We appreciate IFSCA's Suggesti continuous commitment to ons fostering a globally competitive (Non- environment and promoting the Regulato 'Ease of Doing Business' (EoDB) ry) within the IFSC. However, based on our recent experience, the processing timeline for changes — specifically the alteration of a registered Alternative Investment Fund (AIF) scheme name—took considerably longer time than anticipated. You are requested to introduce a processing timeline for such change and Web based centralised system to check the status of such applications.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 41 2(1)(d) We request you to please insert The current expansion uses the words person the definition of person and and beneficial interest without localised beneficial interest clearly in the Act definitions; this can create interpretive gaps to avoid any interpretation issue across corporate bodies, LLPs, trusts and foreign and cross referencing of definition. entities. Cross-referencing or defining these key terms removes ambiguity for enforcement, related-party tests and disclosure obligations and aligns definitions with existing statute/regulator practice. 42 22 (1) & Suggest adding a clarifying The CP already contemplates winding-up if related provision addressing post-first minimum corpus is not achieved within validity of (35 / 36 / close if corpus falls below the PPM / offer document (see proposed Reg 131) minimum corpus (i.e., situations 131). However, the CP does not expressly deal where a scheme attains minimum with the distinct scenario where the scheme had corpus, commences investments achieved first close but subsequently falls below and subsequently the corpus dips the minimum corpus (e.g., larger than anticipated below the threshold due to redemptions, returns of capital). redemptions/returns). 43 22(1) Provided further that any monies Short-term money-market instruments such as received from the contributors Treasury Bills (T-Bills), Commercial Paper (CP) prior to the first close of the and Certificates of Deposit (CD) are standard, scheme shall be deployed only in highly liquid instruments used to park short-term bank deposits with option for cash pending investment. RBI guidance and premature withdrawal and such market practice treat CP and CD as core money- other securities or financial market instruments and note their transferability products/ assets or instruments as and short-dated nature, making them suitable for specified by the Authority. temporary parking. Allowing these instruments Suggest subscription proceeds provides FMEs with a more flexible, market- pending declaration of first-close consistent and cost-efficient liquidity may be parked not only in bank management option compared with only bank deposits but also in highly liquid fixed deposits. short-term money-market instruments (examples: Treasury Bills, short-term Government Securities, Commercial Papers, Certificates of Deposit and repos backed by Government securities), subject to credit, tenor and concentration safeguards and disclosure in the PPM. 44 40 (c) The scheme is a fund of funds The regulation requires disclosure of inter-se scheme investing in scheme(s) allocation, but practical understanding differs with similar requirements. across FMEs and investors. A concrete example Provided that for such scheme in produces consistent market practice IFSC there is no activeS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) management undertaken by the FME and the details of inter-se allocation of the underlying schemes are disclosed in the placement memorandum of the scheme; We request you to please include an example (non-binding illustrative table) in the explanatory notes or as part of Annexure to the regulation to improve clarity regarding details of inter-se allocation of the underlying schemes 45 48 We request you to insert the Operational practice frequently necessitates proviso to permit offer document post-PPM/offer updates that are administrative or updates by way of an addendum, non-material. Allowing addenda (with website with (i) upload on the FME’s official upload + Authority filing) balances investor website, and (ii) filing of the protection and EoDB: investors are promptly addendum with the Authority informed and Authority receives copies by way of within a specified period (e.g., 7 filing; FMEs avoid repeated full-PPM filings for working days) in cases where the immaterial changes. change is non-material; for material changes require investor notification by way of letter/email (and investor consent where necessary) and filing with IFSCA. 46 32(2) Investors investing at least USD We request the removal of the minimum 150,000 and Accredited Investors investment amount requirement, as investors may invest in such schemes generally prefer to begin with a smaller commitment to evaluate the Fund’s performance and review its historical track record before making larger investments. Furthermore, many investors are reluctant to invest a minimum of USD 150,000 at the initial stage, as this amount is considered relatively high for a new fund. To enhance investor participation and make the scheme more client- friendly, we propose setting the minimum investment amount at USD 25,000.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 47 137 The FME shall not undertake any We request that FMEs be permitted to allow their business activities other than as foreign branches to undertake marketing and specified under these regulations, distribution activities not only for their own funds without prior approval of the but also for funds managed by their group Authority: companies. Establishing a separate branch for each group company in every jurisdiction Provided that a FME operating in imposes significant cost and compliance the form of branch in an IFSC shall burdens. inform the Authority within fifteen (15) days regarding any approval Allowing an FME’s foreign branch to support obtained from the sectoral marketing and client servicing for group company regulator in its principal place of funds would enhance cost efficiency, streamline operations, if the activity it intends operations, and reduce the need for multiple to conduct outside IFSC requires licenses and compliance procedures across such specific approval. jurisdictions. Provided further that FME intending to open a branch or representative office in other jurisdictions for the purpose of marketing their offerings and client service shall give prior intimation to the Authority with the details regarding such branch or representative office. 48 2(1)(d) The term 'Beneficial Interest' and This will ensure regulatory clarity. 'Person' needs to be defined in the definition for identifying the associates. Whether this will also include the entities which has beneficial interest on look through basis can be clarified. This can also be clarified via FAQ.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 49 31(4), As per the IFSCA Circular dated The requirement to pay a fee of USD 500 for any 43(4) April 23, 2025, titled “Clarifications changes to the scheme documents should be on the Fee Structure for the restricted solely to material changes, as Entities Undertaking or Intending envisaged under the IFSCA (Fund Management) to Undertake Permissible Regulations, 2025. Activities in IFSC or Seeking Guidance under the Informal To ensure clarity and consistency in Guidance Scheme”, the following implementation, the term “material changes” clause has been introduced: should be explicitly defined within the regulatory framework. “In case of the Scheme(s) launched by the Fund As per the SEBI Master Circular on ‘Alternative Management Entity (FME), any Investment Funds (AIFs)’, ‘Material changes’ may modifications to the scheme be construed as changes in the fundamental documents shall be accompanied attributes of the fund/scheme. Such changes with a fee of USD 500” shall include, but not be limited to the following: However, relevant regulation in (a) Change in sponsor/manager (not including IFSCA (Fund Management) an internal restructuring within the group) Regulations, 2025 mandates that (b) Change in control of sponsor/manager only material changes in the (c) Change in fee structure or hurdle rate which placement memorandum/offer may result in higher fees being charged to the unit document are informed to the holders IFSCA immediately Additionally, it is recommended that a prescribed The fee provision mandates a frequency be introduced for updating non-core USD 500 fee for any amendment sections of the PPM such as legal, regulatory, in placement memorandum/offer and tax considerations; disciplinary history etc. document , regardless of the This would promote consistency in disclosures nature or materiality of the change. while avoiding unnecessary filings for routine FMEs make updates to the updates. scheme documents which do not impact investor rights or fund structure. Imposing a flat fee for each such change creates a disproportionate financial burden. 50 35(4) The second proviso related to Investor approval is mandated when a scheme exemption to FOF scheme should buys or sells securities held in the portfolio of be placed as separate point as other schemes managed by the FME or its approval for investment in associates. This requirement does not extend to underlying scheme do not getting investment or redemption in units of schemes covered in the requirement of managed by the FME or its associates. taking approval. The second proviso currently provides an exemption from investor approval for FoFS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) schemes, subject to disclosures. However, since investment/redemption in underlying schemes is not covered under the approval requirement, this exemption is redundant. It is suggested to remove the exemption clause from the main regulation concerning investor approval and retain the disclosure requirement from the second proviso and reposition it as a standalone provision applicable to FoF schemes. This ensures regulatory clarity and avoids conflating distinct approval and disclosure obligations. 51 35(2), Procedures can be defined if In case of breach of USD 3 million corpus/size, 47(6) corpus (in case of restricted the procedure can be defined for taking scheme) / size (in case of retail necessary action to bring back the scheme scheme) reaches below USD 3 corpus/size by FME. The procedure can be million due to redemption from adopted as prescribed by SEBI in Master Circular existing investors in case of open for Alternative Investment Funds (AIFs). ended scheme. This will ensure regulatory clarity in case of breach of USD 3 million corpus/size. 52 40(1) It is recommended that the Introducing a cap on the contribution requirement minimum skin in the game would reduce capital burden on the FMEs contribution requirement be operating in IFSC, thereby enhancing the capped at USD 750,000 / USD economic viability of fund management 1,500,000, in line with the current businesses. At the same time, it would preserve regulatory framework. the principle of alignment of interest between FMEs and investors, ensuring that the skin in the game objective continues to be met. 53 40(4)(c), The definition of a 'fund of funds This clarification is essential to ensure that 52(1) scheme' inherently allows schemes with transparent and pre-defined investment only in underlying allocation structures are not inadvertently schemes. If a scheme undertakes excluded from the exemption due to active management, it may not misinterpretation of active management. qualify as a fund of funds scheme under the regulatory framework. Clarification is sought on whether the proposed proviso intends to restrict fund of funds schemes that invest in other schemes without naming the specific underlying schemes e.g., where the scheme document refers generically toS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) “Equity schemes” or “Large Cap schemes” without identifying the exact schemes. If that is the case, it should be clarified that fund of funds schemes which disclose the specific names of the underlying schemes along with indicative allocation ranges in the scheme document should not be considered as engaging in active management. Such schemes should remain eligible for exemption from the requirement of contribution by the FME or its associate. 54 47(5) The proviso related to exemption The definition of associates does not include to FOF scheme should be placed other schemes managed by the FME or its as separate point as approval for associates. Therefore, FoF schemes investing in investment in underlying scheme such underlying schemes are not subject to the do not getting covered in the investor approval requirement. requirement of taking approval. It is suggested to remove the exemption clause from the main regulation concerning investor approval and retain the disclosure requirement from the proviso and reposition it as a standalone provision applicable to FoF schemes. This ensures regulatory clarity and avoids conflating distinct approval and disclosure obligations.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 55 52(1), The following modification is This revision broadens the exemption to include 40(4)(c) suggested. investments in the schemes which are not necessarily subject to similar regulatory Provided further that the requirements, are nonetheless overseen by contribution by the FME or its competent authorities and accessible to retail associate shall not be mandatory investors in their respective jurisdictions. It in case of a fund of funds scheme enhances flexibility for fund of funds structures investing in scheme(s) which has without compromising investor protection. similar requirements, which are regulated by the concerned The rationale is same as given in consultation regulatory authority in its home paper. By inclusion of such schemes in the jurisdiction and are permitted for exempted list where the FME does not exercise offering to retail investors in their managerial discretion and, therefore the home jurisdiction. necessity of skin-in-the-game contribution is diminished, the capital requirement for the fund management business in IFSC gets further reduced, making it more economically efficient for the FMEs. Similar flexibility may also be extended in case of fund of fund restricted scheme. 56 Clause It is suggested to make below Requiring board approval prior to implementation (o) changes: or amendment of every policy or framework may For all the policies, frameworks, hinder operational agility, especially in time plans, by whatever name called, sensitive scenarios where immediate action is that the FME prepares in necessary to maintain compliance. Allowing for compliance with these regulations, post facto ratification would enable smoother approval from the board of operations while preserving governance directors or designated partners or oversight. trustees, as may be the case, of the FME shall be obtained prior to their implementation or amendment. 57 36(3) The CP states that time period for The proposal may reduce the operational cost of NAV disclosure to investors may the FMEs managing close ended non-retail be enhanced to one year in case schemes and enable ease of doing business in of a Category I or Category II IFSC. scheme on prior approval of at least 75% investors in the scheme by value of their investments. In this regard, it is suggested that similar provisions permitting NAV disclosure on yearly basis may also be included for Category III close-ended (non-S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) retail) schemes. Revised Proposed Text 36 (3) The FME shall ensure that the NAV is disclosed to the investors at least on a monthly basis in case of an open-ended scheme, starting from the month in which the first close is declared for the scheme, and half-yearly in case of a close ended scheme, starting from the half-year period in which the first close is declared for the scheme, and within such time period as disclosed in the placement memorandum. Provided that such period may be enhanced to one year in case of a Category I scheme or a Category II scheme or a Category III (Non- retail closed ended) scheme on prior approval of at least seventy- five per cent. (75%) investors in the scheme by value of their investments 58 39(1) CP states that for Category I or The proposal may reduce the operational cost of Category II schemes for which the FMEs managing close ended non-retail FME has obtained prior approval schemes and enable ease of doing business in from investors in terms of proviso IFSC. to regulation 36(3), computation of NAV shall take place at least yearly, starting from the FY in which first close is declared for the scheme. It is suggested that similar provisions may also be provided for Category III close- ended (non-retail) schemes. Revised Proposed Text 39 (1) FME shall compute the NAV of each restricted scheme at least on a monthly basis, starting from the month in which the first close is declared for the scheme: Provided that in case of a closeS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) ended restricted scheme the computation of NAV shall take place at least half-yearly, starting from the half-year period in which the first close is declared for the scheme. Provided further that for such Category I schemes or Category II schemes or a Category III (Non-retail closed ended) scheme for which the FME has obtained prior approval from investors in terms of proviso to sub-regulation (3) of regulation 36, the computation of NAV shall take place at least yearly, starting from the financial year in which the first close is declared for the scheme. 59 104(2) We seek your clarification For The current FME framework provides that a India-inbound investments (where Family Investment Fund (FIF) may be the beneficiaries and contributors established by a single family, however, are the same family group, and no presupposes that the FIF is “managed by an third-party capital is solicited), the FME” and does not explicitly provide for a requirement to appoint an structure where the family itself acts as the authorised FME results in investment manager for its proprietary capital. additional operational However, for following rationale IFSCA should requirements which may not align clarify whether Family Investment Fund can be with the nature and purpose of a self-managed. family office structure. Accordingly, we seek your kind clarification on 1. Alignment with Global Family Office whether a self-managed FIF can Practices: be permitted, particularly in cases In international jurisdictions such as the where: Singapore (Family Office regime), and Luxembourg (SIF), single-family investment - The fund is wholly owned and structures are permitted to be self-managed, controlled by a single family (as provided that the investment management defined under the Regulations). function is confined within the family entity - The investment decisions are and no external investors participate. These made by the family-appointed regimes typically exempt such entities from officials; and licensing as fund managers, recognising the The fund does not manage or pool principle that family-owned investment any third-party money. vehicles do not constitute managing third- party funds. In international jurisdictions such as the Singapore (Family Office regime), and Luxembourg (SIF), single-family investmentS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) structures are permitted to be self-managed, provided that the investment management function is confined within the family entity and no external investors participate. These regimes typically exempt such entities from licensing as fund managers, recognising the principle that family-owned investment vehicles do not constitute managing third- party funds. 2. Substance and Governance Safeguards: A self-managed FIF could continue to be subject to appropriate safeguards, such as: • Maintaining a registered office in IFSC. • One employee at GIFT per FIF; and • Other applicable requirements for FIFs at GIFT. 3. Encourage Re-domiciliation: This will encourage global family offices and India-focused investment structures currently operating overseas to re-domicile to GIFT- IFSC, thereby consolidating India-linked wealth management activities within a GIFT regulated framework. 60 107A We seek your guidance on the As we understand from the Regulation 107G (1) interpretation of certain provisions provides that Third-Party Fund Management under the International Financial arrangements can manage only restricted Services Centres Authority (Fund schemes in accordance with Part B of Chapter III, Management) Regulations, 2025 which includes launching restricted schemes in relation to Family Investment including Category I, II, and III AIF. Funds (FIF) and Third-Party Fund However as per the Explanation II to Regulation Management arrangements 104(5) of Part C of Chapter VI a Family Investment Fund may be construed Category I Alternative Investment Fund, Category II Alternative Investment Fund or Category III Alternative Investment Fund depending on the investment strategy adopted in accordance with regulation 30. Accordingly, we understand that a Family Investment Fund can be launched under the Third-Party Fund Management Services. However, we need your clarification as to whether our understanding is appropriate.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 61 2(1)(d) There is a need to define "Person" Since there is no specific definition or reference under the regulation or reference to another regulation. may be added from other acts such as Companies Act. 62 35 (7) Proposed insertion of clause 35 Currently, only excuse is provided which is not (7) on pari-passu rights on enough. There could be various reasons for distribution must be deleted until distributions to be in a different ratio – like foreign the entire list of exceptions is not exchange rates used to convert capital provided by IFSCA. commitments, differential costs for each class of units like management fees, distribution of additional returns to manager or its affiliates, defaulting contributors, etc. Making this amendment effective without the list of exceptions may result in non-compliance at the fund level. Alternatively, grandfathering to be granted for existing schemes from applicability of such pari-passu distribution. 63 36 (3) The NAV disclosure requirement The scheme may not have necessarily raised must start from the quarter in funds or deployed capital from the first close. which the scheme has first raised Therefore, there may not be any asset held by the funds from the investors. scheme at the time of first close. It will be prudent start computing and disclosing NAV after the Revised text: funds are raised by the scheme. The FME shall ensure that the NAV is disclosed to the investors at least on a monthly basis in case of an open-ended scheme, starting from the month in which the first close is declared for the scheme, starting from the month in which funds are raised from investors first time and half-yearly in case of a close ended scheme, starting from the half-year period in which the first close is declared for the scheme, starting from the half year period in which funds are raised from investors first time and within such time period as disclosed in the placement memorandum Provided that such period may be enhanced to one year in case of a Category I scheme or a Category II scheme on prior approval of atS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) least seventy-five per cent. (75%) investors in the scheme by value of their investments. 64 36 (4) The timeline to disclose the 1. The reporting of scheme portfolio within one scheme portfolio must be aligned month is practically not adding value to the to the Fund documents and PPM. investors since the valuation of the scheme portfolio investments takes longer than one Revised text: month. Further, the schemes financial statements prepared post conducting The FME shall ensure that the valuation of portfolio companies would portfolio under the scheme is contain the portfolio details along with latest disclosed to the investors at least fair value. Such updated details will provide on a quarterly basis, starting from more meaningful information to the investors. the quarter in which the first close is declared for the scheme, within 2. Multiple reporting may cause confusion to the one month from the end of the investors. quarter starting from the quarter in which the scheme makes its first 3. The portfolio can be disclosed after the portfolio investment or temporary scheme has made investment in any portfolio investment, within such time company or made temporary investments period as disclosed in the which may not necessarily happen on the placement memorandum or the date of first close. Therefore, the portfolio scheme documents. disclosure must be made starting from the quarter in which investments are made. 65 39 (1) The NAV computation requirement A consequential change proposed under must start from the quarter in regulation 36 (3) above. which the scheme has first raised funds from the investors. Revised text: FME shall compute the NAV of each restricted scheme at least on a monthly basis, starting from the month in which the first close is declared for the scheme starting from the month in which funds are raised from investors first time: Provided that in case of a close ended restricted scheme the computation of NAV shall take place at least half-yearly, starting from the half-year period in which the first close is declared for the scheme starting from the half year period in which funds are raised from investors first timeS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) Provided further that for such Category I schemes or Category II schemes for which the FME has obtained prior approval from investors in terms of proviso to sub-regulation (3) of regulation 36, the computation of NAV shall take place at least yearly, starting from the financial year in which the first close is declared for the scheme starting from the financial year in which funds are raised from investors first time. 66 119 (2) The new clause must (fa) must not Sub-clause (g) already provides for a generic be added. provision which relates to documents required under this regulation. Further, maintaining such dynamically changing documents such as SOPs, plans and procedures would become too onerous increasing operational burden on the FMEs. 67 134 The requirement should that be of Unlike a company, all the legal forms (such as sending out audit report and Trusts, LLP) may not be required to prepare audited statements instead of annual report and/or abridged summary under Annual report and / or abridged the respective regulations or Acts. Therefore, the summary. requirement must that be of preparing financial statements in accordance to the standards Revised Text: adopted by the scheme under the PPM. Reference may also be drawn to FAQs issued by (1) FME shall prepare an annual IFSCA (Q No 27) where it has been clarified that report of accounts of the schemes the books of account of FME and the scheme and abridged summary thereof, may be prepared as per Indian GAAP or IND AS financial statement in accordance or IFRS or US GAAP or such other accounting to the standards specified under standard as under permitted under applicable the scheme placement law. memorandum and get them audited by an independent auditor, in respect of each financial year and shall submit the same to the Authority not later than four six months from the end of financial year. (2) The annual report and abridged summary The financial statements shall contain details that are necessary for the purposeS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) of providing a true and fair view of the operations of the scheme. (3) An abridged summary of the annual report The financial statements along with the independent auditors report of the scheme shall be shared with the investors within four six months from the end of the financial year: Provided that if an investor seeks the full annual report, the FME shall provide the same within fifteen (15) days from the date of the receipt of such request. 68 135 (1) It is requested to clarify under the The current proviso language not giving enough proviso that the requirement of the clarification. auditor being an affiliate is being removed and not the entire audit of the scheme. 69 3rd It is suggested to delete this new All policies or frameworks – usually are Schedule clause. operational in nature and may not necessarily (o) require the approval from the Board of FME. The senior management or employees are appointed to ensure operational aspects, so a signed policy by such senior person or compliance officer should be sufficient. Lastly, trustee has no role to play in internal policies & frameworks of the FME, so this should be deleted. 70 40(4) (4) The said contribution shall be 1. The core purpose of Skin-in-the-game (SITG) exempted if:- under IFSCA (Fund Management) (a) at least two-thirds (2/3rd) of the Regulations is to ensure alignment of interest investors in the scheme by value where the FME exercises meaningful permits waiver of such managerial discretion over security-level contribution; decisions. In schemes investing exclusively in (b) at least two-thirds (2/3rd) of the SEBI-regulated mutual fund schemes, the investors in the scheme are FME: accredited investors; or a) does not select or trade underlying (c) The scheme is a fund of funds securities, scheme investing in scheme(s) b) does not determine timing of buys/sells in with similar requirements. investee companies, Provided that for such scheme in c) does not exercise credit, equity, duration, IFSC there is no active or liquidity management judgement. management undertaken by the All such discretion rests entirely with the FME and the details of inter-seS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) allocation of the underlying manager SEBI regulated mutual fund schemes are disclosed in the manager. placement memorandum of the scheme; Notwithstanding anything 2. SEBI mutual funds are already subject to contained above, a scheme which mandatory sponsor contribution requirement invests solely in SEBI-regulated (SITG equivalent) under SEBI’s MF mutual fund scheme(s) and does regulations. Therefore, imposing an not undertake any direct additional SITG at the IFSC scheme for a investment into underlying fund-of-funds product results in duplication of securities or does not exercise any regulatory safeguards and double capital security level discretion shall be locking for the same economic risk. eligible to obtain exemption from the requirement of FME and 3. The FME’s role in such schemes is limited to associate contribution. macro allocation at fund level, not micro-level security selection. In view of the above, we request the Authority that for schemes investing exclusively into Indian mutual fund schemes should be expressly included within the SITG exemption framework, even where inter-se allocation is not pre-disclosed.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 71 2 (1)(d) We appreciate the objective of 1. GIFT hosts multiple global financial strengthening related-party institutions with complex cross-border transparency. However, the structures and numerous group entities. proposed change to capture Moving from “paid-up equity share “beneficial interest” within the capital/partnership interest” to “beneficial definition of associate materially interest” risks covering substantial group expands scope beyond current entities worldwide, regardless of operational practice and creates unintended nexus with the IFSC entity. This makes the consequences for global compliance obligation onerous. institutions operating from GIFT 2. As a comparative regulatory framework in and will significantly increase the India, SEBI’s AIF framework focuses on compliance burden. We thresholds in paid-up equity share recommend that "beneficial capital/partnership interest, not “beneficial interest" be defined to cover direct interest”. Aligning definition with the domestic equity holders or entities to whom AIF approach would promote regulatory beneficial interest has been consistency for funds that invest both onshore transferred to by such direct equity and through IFSC. holders. 3. Code of Conduct and Obligation for Fiduciaries (Part B) of IFSCA (Fund Management) Regulation 2025 (a)(xi) requires Fiduciaries to quarterly review all transactions between the schemes, FMEs, and their associates. With the expanded definition, fiduciaries will be required to review on a much broader set of transactions every quarter, increasing operational workload and complexity. 72 35(1) We propose draft revision to The detailed context of the key regulatory Regulation 35 (1) of the IFSCA provisions, concerns, rationale and proposal (Fund Management) Regulations, are provided below: 2025 (“the FM Regulations”) that Key regulatory provisions restricts open ended schemes to a Regulation 34 of the FM Regulations maximum investment in securities permits investment by restricted schemes in of unlisted companies to 25% of securities issued by unlisted entities. the corpus of the schemes However, Regulation 35 of the FM Regulations (“Investment Restriction”) in limits the maximum investment in securities of unlisted securities. We propose unlisted companies to twenty-five percent revised text in line with our (25%) of the corpus of the schemes (“Investment suggestion and rationale: Restriction”) in case of restricted schemes as Proposal 1 under: 35. (1) In case of an open ended “35 (1) In case of an open-ended scheme, scheme, the maximum investment the maximum investment in securities of in securities of unlisted companies unlisted companies should not exceed twenty- should not exceed twenty- five five percent (25%) of the corpus of the schemes.”S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) percent (25%) of the corpus of the In context of the above, Regulation 2(1)(k) of the schemes. FM Regulations defines “corpus” as “the total Provided that, the investment amount of funds committed by investors to the threshold in securities of unlisted fund management entity under a scheme by way companies may be enhanced (i) of a written contract or any such document as with the approval of at least on a particular date;” seventy five percent of investors in Further, Regulation 37 of the FM Regulations the scheme by value of their allows a restricted scheme to borrow funds or investment at the time the FME engage in leveraging activities, subject to proposes to increase the compliance of specified conditions. threshold; or (ii) if each investor in For investment in securities in India, Restricted the scheme (excluding the FME Schemes are also registered with SEBI as or its associates, or the Foreign Portfolio Investors (FPIs) under SEBI employees, directors, designated (Foreign Portfolio Investors) Regulations, partners or partners of the FME) 2019 (“FPI Regulations”). FPI regulations is an Accredited Investor subject allows for investments in debt securities (listed to a specific disclosure in the or unlisted) subject to conditions as specified by placement memorandum Reserve Bank of India. identifying such increased Challenges threshold. While the FPI Regulations permits FPIs to invest Provided that in case of an open- in debt securities, listed or unlisted, the ended fund of funds scheme, this Investment Restriction under FM Regulations requirement shall not be on unlisted applicable if such scheme is companies limits the ability of FPIs (registered as investing in other open-ended restricted schemes) based out of GIFT IFSC to scheme(s) which shall not have invest in unlisted debt securities. Investments in investment in unlisted securities in the debt securities (listed and unlisted) have been excess of twenty-five per cent. gaining significant momentum, globally. The (25%) of their corpus. Investment Restriction hampers investment Provided further that the flow from sophisticated investors, who seek investments by an open-ended diversified portfolios through their investment in scheme in unlisted securities shall Restricted Schemes. This can also stifle the be undertaken only upon growth of the unlisted debt market by limiting the achieving the minimum corpus of liquidity pool of such potential investors and USD 3 Million. ultimately impacting overall market development and innovation within this segment. Proposal 2 Rationale. 35. (1) In case of an open ended scheme, We understand that one of the key rationale for the maximum investment in securi the restriction on investing in unlisted companies ties of unlisted companies should for open-ended schemes is to limit liquidity not exceed twenty- five percent concerns attached to the investments in unlisted (25%) of the corpus of the schem companies, particularly given the potential exit es. atleast 75% of the corpus of th options for investors. e scheme is invested in securities It is important to note that investors in RestrictedS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) other than securities of unlisted c Schemes are sophisticated and well-informed ompanies. about the risks involved thereby enabling them to Provided that in case of an open- make an ended fund of funds scheme, this informed investment decision. They are well requirement shall not be placed to ascertain the risks associated with a applicable if such scheme is diversified portfolio of the Restricted Scheme investing in other open-ended consisted of unlisted securities and the impact on scheme(s) which shall not have liquidity. If such risk is acceptable and consented investment in unlisted securities in to by such investors, they should ideally not be excess of twenty-five per cent. restricted by the governing regulatory (25%) of their corpus. framework. In this light, the existing regulations Provided further that the invest may need to be reviewed to ensure a level ments by an open- playing for FPIs from all jurisdictions. For ended scheme in unlisted example, the non-retail schemes in jurisdictions securities shall be such as Singapore are not subject to such similar undertaken only upon restrictions. This disparity in the regulatory achieving the minimum corpus frameworks puts FPIs set up as Restricted of USD 3 Million. Schemes in GIFT IFSC at a competitive disadvantage with other FPIs based out of other jurisdictions and makes it challenging for them to compete. This limitation reduces the investment opportunities and flexibility for the FPIs set up as Restricted Schemes in GIFT IFSC, making it less attractive for them to operate in this jurisdiction. This forms compelling basis to reassess the current regulations to promote a more competitive environment. The restricted schemes have the freedom to leverage, subject to compliance with the specified conditions. The Investment Restriction creates an uneven playing field for such restricted schemes that have access to leverage but puts them in a disadvantageous position. It is a constraint of the scheme’s capacity to diversify into potentially lucrative unlisted debt companies. This results in limited diversification opportunities and reduces potential returns of the open-ended schemes. This reduces the overall investment flexibility and opportunities for FPIs operating out of GIFT IFSC, potentially affecting their returns and competitiveness. Proposal / Suggestion Proposal 1: We propose a nuanced approach whereby investments in unlisted debt securitiesS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) exceeding Investment Restriction could be permitted, subject to the consent of at least seventy- five percent of investors in the scheme by value investors. This approach enables maintaining an appropriate balance between investor protection based on transparency as well as informed consent and the flexibility needed for sophisticated investors to seize opportunities in unlisted debt securities. By allowing flexibility with investor’s consent, a more dynamic environment can be fostered without compromising regulatory safeguards, ultimately benefiting both the investors and the broader market. This will create a level playing field for FPIs operating from GIFT IFSC compared to those operating from other jurisdictions. Proposal 2: We alternatively propose a minimum limit of 75% of the corpus to be invested in listed securities. This proposal seeks to ensure that open- ended schemes maintain a minimum allocation of seventy-five per cent (75%) of their corpus in securities other than those issued by unlisted companies. This will safeguard Investor Interests by enhancing liquidity in the fund. We understand that the proposal is intended to enhance the scenarios for exemption from the requirement of skin-in-the-game contribution. However, the objective with respect to disclosure of the inter-se allocation of the underlying schemes is already achieved through the existing disclosure framework under the FM Regulations. Separately, fund-of-funds typically require a degree of flexibility to adjust/rebalance allocations to underlying investment. Specifically carving out “active management” could limit commercial discretion to fund of fund schemes, despite the underlying investments fulfilling the manager commitment criteria.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 73 40(4) ( c) We propose deletion of the We understand that the proposal is intended to proviso: enhance the scenarios for exemption from the “Provided that for such scheme in requirement of skin-in-the-game contribution. IFSC there is no active However, the objective with respect to disclosure management undertaken by the of the inter-se allocation of the underlying FME and the details of inter-se schemes is already achieved through the existing allocation of the underlying disclosure framework under the FM Regulations. schemes are disclosed in S eparately, fund-of-funds typically require a the placement memorandum of degree of flexibility to adjust/rebalance the scheme;” allocations to underlying investment. Specifically carving out “active management” could limit commercial discretion to fund of fund schemes, despite the underlying investments fulfilling the manager commitment criteria. 74 23(5) 23 (5) FME shall ensure that all • Hope this doesn’t impact the net differential in investors in a Venture Capital distribution due to Management Fee Carried scheme are accorded same rights. Interest/ Performance fees etc. which Provided that FME may offer depends upon the Unit/Share Class. It would differential rights to select be good to provide explicit clarity so that there investors, if the same is in are no interpretation issues accordance with the disclosures in • The above is also in context of Restricted the placement memorandum and Schemes. the rights of other investors are not affected. (6) The rights of the investors in the distributions from a Venture Capital scheme shall be Pari- passu in all aspects and in the same proportion as the amounts invested by them, except in the cases of excuse and exclusion as per the placement memorandum, or as may be disclosed in the Private Placement Memorandum for different unit class or share class or in such cases and in such manner as may be specified by the Authority. 75 2(1)(d) Proposed Clarifications: Delete In addition to the proposed language in the the following text in orange below consultation paper, and from an Ease of Doing in the Regulation 2(1)(d)(i): Business (EoDB) perspective, we suggest Proposed deletions: deleting the words “or trustee” from Regulation (1)(d) “associate” means- 2(1)(d)(i). (i) a company or a limited liability partnership (LLP) or a body This is because the FME can only be establishedS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) corporate a person in which a as a company, LLP, or a branch thereof. Since the director or trustee or partner of the FME cannot be set up as Trust, there is no need FME or the FME or any fiduciaries of concept of a trustee. as defined in regulation 17 of these regulations, either Furthermore, Regulation 17 defines fiduciaries to individually or collectively, hold include ‘trustees (including the board, in case of twenty per cent. (20%) or more of a trustee company) where the scheme is set up its paid-up equity share capital or in the form of a trust’. Hence, even if the words partnership interest, as the case “or trustee” are deleted from Regulation 2(1)(d)(i), may be beneficial interest. there would be no conflict of interest or regulatory gap and will be in line with the rationale suggested in the consultation paper. 76 2(1)(d) Proposed Clarifications: Insert the Trustees and similar fiduciaries frequently act on following text in orange below at behalf of multiple AIFs or pooled investment the end of the Regulation vehicles without holding any beneficial interest or 2(1)(d)(iii): exercising control in the AIF. Treating such fiduciaries as “associates” merely by virtue of their fiduciary role may potentially lead to Proposed insertion: unnecessary regulatory complications and perceived conflicts of interest. (iii) Any other person…… The proposed clarification ensures that Explanation: For the avoidance of fiduciaries who act in a representative or doubt, a person acting solely in a custodial capacity only are not inadvertently fiduciary capacity (including a captured under the “associate” definition. trustee of an AIF, or other fiduciary arrangement), shall not be deemed to be an associate of the FME or any other entity by reason only of such fiduciary capacity, provided that such person does not have any beneficial interest or control in such entity. 77 23(3) Proposed Suggestion: The • Leading fund jurisdictions such as Singapore proposed insertion may (Monetary Authority of Singapore (MAS)), inadvertently constrain the Mauritius (Financial Services Commission flexibility of the FME and investors (FSC)), and the United Kingdom (Financial to mutually negotiate commercial Conduct Authority (FCA)) do not impose any terms and would be contrary to statutory requirement that all investors in a global practices. venture capital or private equity fund should be treated identically. Instead, distribution and Disclosure-based, principles- governance rights are entirely contractual, driven framework rather than a governed by the Limited Partnership mandatory pari passu rights Agreement (LPA) or Limited LiabilityS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) prescription would better align the Company Agreement (LLC Agreement) GIFT IFSC regime with negotiated between the General Partner (GP) international best practices and and Limited Partners (LPs). The SEC does reinforce its strategic positioning not prescribe a “one-size-fits-all” model; the as a competitive global jurisdiction regulatory expectation centres on disclosure for setting up funds. Therefore, and fairness, rather than over-regulating the IFSCA may consider deleting this fund and the fund managers. insertion entirely. • Additionally, it is important to note that the Venture Capital Schemes and Restricted Schemes under the FM Regulations are accessible only to sophisticated and accredited investors, who possess the necessary experience, bargaining power, and advisory support to negotiate their rights. For such investors, a prescriptive uniform rights requirement may potentially be unnecessary, over-regulatory, and counter-competitive, potentially deterring global LPs who are accustomed to negotiated flexibility in other jurisdictions. 78 23(6) Proposed Suggestion: The Globally, jurisdictions such as Singapore (MAS), and proposed insertion restricts the Mauritius (FSC), the United Kingdom (FCA), and 35 (7) flexibility of FME(s) to structure the United States (SEC) do not impose statutory differential distribution restrictions mandating pro-rata distributions mechanisms, a practice that is among investors. Instead, fund managers and well-accepted globally and often investors have the contractual freedom to used to incentivize key negotiate distribution waterfalls, carried interest, stakeholders such as employees, or incentive allocations, which are documented in anchor investors, or strategic the Limited Partnership Agreement and disclosed partners. The proposed addition is in other fund documents. not aligned with global fund management practice and unduly Regulating pro-rata distribution would restricts commercial flexibility. significantly reduce flexibility for FMEs to Therefore, IFSCA may consider structure commercial arrangements that align deleting this insertion entirely. interests or reward performance (for instance, providing differential returns to anchor investors, Alternative Proposal: In the event strategic partners, or key employees through that the above is not possible, carried interest or incentive participation). Such IFSCA may consider providing a flexibility is critical to fund’s economics globally specific carve out for Regulation and its restriction may discourage institutional 23(6) and Regulation 35(7) for participation or deter fund managers from FME(s) as mentioned in below: domiciling in GIFT IFSC. Provided that the FME may In the event that IFSCA intends to retain this undertake differential or clause, it should explicitly provide for differentialS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) disproportionate distributions of distributions subject to disclosure to safeguard proceeds to any person, including investor transparency while preserving market- any investor, employee, sponsor, aligned structuring flexibility. investment manager, or strategic partner, subject to appropriate disclosure to all investors and to the Authority. 79 2(1)(d) The definition of “Person” needs to Person includes individual. Paragraph talks of be inserted otherwise; it may lead holding 20% stake etc. Hence use of person may to interpretational issues. Suggest be inappropriate. instead of Person the word "Entity" be used. Presume the intent is NOT to cover individuals. Alternatively, mention that the definition of person would be as per Income tax Act. 80 23(3) It is suggested that IFSCA issue To avoid interpretation issues as well as misuse specific guidance on the treatment of Excuse rights, it is imperative that IFSCA and documentation of excused or issues detailed guidelines on Excused rights. excluded investors under Regulation 23(3), including the conditions, approval process, and disclosure requirements in the placement memorandum to ensure uniform interpretation and implementation across FMEs. 81 23(6) It is suggested that IFSCA issue To avoid interpretation issues as well as misuse specific guidance on the of AIFs, it is imperative that IFSCA issues detailed interpretation and application of guidelines on pro-rata and pari-passu rights for pro-rata and pari-passu rights Investors. among investors, particularly in cases involving differential distribution structures, to ensure consistency and clarity in implementation. 82 Insert The rights of the investors in the The term pari passu means all investor being on new distributions from a Restricted equal footing, referring to the equal priority or subsecti Scheme should only be pro-rata to seniority of claims, while pro rata means 'in on as the amount invested by them and proportion' referring to the proportional 23(7) for not pari passu. Further, the list of distribution based on the investment made by VCF and exception should be extended to each investor. Given investors commit at different 35(8) for differential management fee, stages of fund raise and agree on different capital Restricte differential expense structure, any commitment, different economic interests (i.e. d other differential economic rights management fees, opex, set-up fee) are offered to investors based on amount of their capitalS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) Nonretail and default provisions in addition commitment and the stage at which they Schemes to excused / exclusion. participate in fund raise process. The said differential economic interest model is backed by different classes of units issued by fund vehicles and explicitly captured in fund documents. Additionally, in a situation where an investor defaults or is excused / excluded, provisions captured in the fund documents get triggered requiring a rejig of the pro-rata share of investors. In light of above background, we propose to restrict the right of investors should be pro-rata to the amount invested with few exceptions in line with industry standards already prevalent and in practice. Distortion of this ability of FME to structure the unit classes as per commercials agreed with investors will jeopardise existing funds distribution waterfall and also make raising future funds in GIFT difficult. 83 26(2) The waiver for independent Since it has been accepted that the NAV declared valuation currently available to by the underlying Fund is acceptable as a Fair Fund of Funds (FoF) schemes Value, the principle needs to be adopted for ALL should be extended to all funds where the investment has been made into investments by an IFSCA- another Investment Vehicle. This will ensure that registered fund into another fund only Direct investment by an AIF requires or investment vehicle regulated by valuation by an independent entity. This is also a financial sector regulator in India supported by the Proviso on page 36 of the or abroad, to avoid duplication of Consultation paper which refers to "no active valuation and ensure operational management" undertaken by the FME. efficiency.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 84 36(3) Clarification is requested on The IFSCA (Fund Management) Regulations, whether the proposed requirement 2025, currently specify the frequency for of obtaining consent from at least disclosure of NAV to investors but remain silent seventy-five percent (75%) of on the frequency of valuation by an independent investors by value is intended to professional. Under the extant framework, a apply to: close-ended Restricted Scheme is required to (a) the annual disclosure of NAV to disclose NAV on a half yearly basis to investors. investors, or The Consultation Paper introduces an option to (b) the frequency of undertaking disclose NAV on an annual basis, subject to independent valuation of the consent from 75% of investors by value. This is a scheme’s investments. welcome proposal. Typically, funds disclose NAV on a quarterly or half-yearly basis to investors, based on internal valuation estimates by the FME which are then updated basis annual audit and valuation exercise. This practice is well known to investors and aligned with their expectations. In case investors request for any greater reporting frequency, FMEs negotiate the same with investors and arrive at an acceptable practice. It will be helpful if IFSCA can make it abundantly clear in the regulations that close ended funds can disclose NAV as well as carry out external valuations at least once in a reporting period - calendar or financial year. This will help both investors and FME in setting bare minimum expectations. 85 40(1) Request IFSCA to retain the We appreciate IFSCA’s intent to enhance existing commitment threshold of alignment of interest between Fund Management USD 750,000 for funds above Entities (FMEs) and investors through a USD 30 million, which has proven mandatory minimum commitment. However, we effective in aligning incentives would like to submit that the proposed without unduly burdening FMEs. If requirement of a minimum 2.5% FME IFSCA is trying to align the FME commitment (with a cap of 10%) of the GIFT fund commitment with sponsor corpus is significantly higher than what is commitment under SEBI AIF commercially feasible or globally accepted in the Regulations, it is advisable if along private capital industry. with a 2.5% minimum cap, an amount quantum is also Under the SEBI (AIF) Regulations, 2012, the prescribed to not put undue minimum sponsor commitment for Category I and burden on FMEs. II AIFs is the lower of 2.5% of the corpus or INR Additionally, in cases where the 5 crore — a benchmark that balances “skin in the GIFT fund is structured as a feeder game” expectations with fund managers’ capital or fund-of- funds, and invests a constraints. The current IFSCA FM RegulationsS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) majority portion (i.e., >51%) into also adopt a pragmatic threshold i.e. a minimum underlying funds, it is commitment of USD 750,000 for funds exceeding recommended that IFSCA provide USD 30 million in size, which in practice often a pro-rata relaxation of the FME results in FMEs committing above the prescribed commitment, such that the minimum following negotiations with investors. requirement applies only to the The proposed increase to a min 2.5% of corpus portion of the corpus deployed would substantially raise the capital burden on directly from the GIFT fund. FMEs, particularly in a multi-fund environment where managers are in the process of raising successive vehicles. Given that fund tenures especially when it comes to VC funds are typically 8-10+ years and capital recycling occurs only upon exit events, such a high capital requirement could strain liquidity and impede the ability of managers to launch future funds, contrary to the broader policy objective of scaling India’s fund management ecosystem in GIFT IFSC. In practice, investors already ensure sufficient “skin in the game” through commercial negotiation, with commitments ranging between 0.5% to 2%, depending on fund size, strategy, and maturity of the manager. Hence, mandating a higher regulatory minimum is likely to be counterproductive, leading to fewer funds registered with IFSCA and restricting participation to only very large or institutionally backed FMEs. A minimum monetary threshold like the current one should be retained. Also, an investor consent (at least 75% in value) process should be permitted whereby the FME can commit nil or a lower amount than prescribed. By this the interests of investors as well as FME can be jointly taken care of. Lastly, relaxation for FOF where majority portion is invested in underlying funds, pro-rata relaxation in FME commitment requirement should also be considered to ensure proportionality and avoid double counting of sponsor capital across fund layers.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 86 36 (4) The FME shall ensure that the Nippon is a Fund-of-Funds investing in multiple portfolio under the scheme is Venture Capital funds. For reference, Nippon disclosed to the investors at least Fund 1 has 14 VCs and has an exposure to 400+ on a quarterly basis within two start-ups through these VC Funds. A similar months from the end of the portfolio shall be created in Nippon GIFT Vehicle. quarter. Basis our experience, the underlying start-ups might typically report their quarterly financials / MIS within 1 month from the end of the quarter. Based on this, the VC Funds (that have invested in these underlying start-ups) typically share their quarterly investor report 15-20 days after they receive the quarterly financials from their underlying start-ups i.e., within 45-50 days from the end of the quarter. In this normal scenario, a Fund-of-Funds registered in GIFT shall not be able to send its quarterly report to the Contributors within 1 month from the end of the quarter and might lead to non-compliance. We anticipate that all the GIFT vehicles that are investing in unlisted asset classes in India and offshore shall face the above difficulties. In the light of the above realistic timelines of the quarterly reporting by start-ups and VC Funds as well as the practical difficulties anticipated by funds investing in unlisted asset classes, we request you to kindly consider revising the quarterly reporting requirement for GIFT (both CAT II and CAT III) to at least 2 (two) months from the end of the quarter. 87 39 (1) FME shall compute the NAV of Same as point 3 above. Monthly NAV is not each restricted scheme at least on possible for a Fund of Funds investing in unlisted a quarterly basis. companies.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 88 107E (1) Replace the requirement for a Smaller third-party schemes (USD 3–50 million) dedicated Principal Officer for cannot economically support a dedicated each scheme with a flexible Principal Officer. Our FME recently declined a staffing requirement based on USD 5 million mandate because costs were not scale and complexity. While the viable under the current rule. Many small intent is to ensure accountability schemes make compliance disproportionately and oversight, this obligation is burdensome for FMEs with multiple mandates. commercially and operationally Mandating a dedicated Principal Officer for each unviable for smaller third-party scheme renders offering such fund structures schemes. infeasible under current regulations. “For each scheme managed under the third-party Suggested Wording: “The FME fund management arrangement, the FME shall shall ensure one KMP responsible appoint a dedicated person as the Principal for third party FM and have Officer who shall be responsible for the overall adequate and identifiable activities with respect to that scheme, including resources for managing third-party but not limited to fund management, risk schemes. A dedicated Principal management and compliance.” This requirement Officer need not be scheme- is commercially unviable for smaller schemes specific where unjustifiable, provided governance, compliance, and risk management standards are maintained.” 89 107E (3) Request amendment to allow the Compliance requirements for Retail and Non- same Compliance Officer to Retail schemes are not substantially different in oversee both Retail and Non- practice. A single experienced Compliance Retail schemes, provided Officer can efficiently manage both, especially in appropriate resources, FMEs with lean structures or smaller operations. independence, and conflict This amendment would allow operational management are ensured. flexibility without compromising compliance. Suggested Wording: “The FME shall ensure adequate compliance oversight across Retail and Non- Retail Schemes. Where justified by the scale and complexity of operations, the same Compliance Officer may oversee both categories, provided that potential conflicts are managed and the Authority is satisfied with the sufficiency of resources and governance structure.”S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 90 107B(ii), Request formal clarification on Clause 107B(ii) suggests that the third-party must 107H whether it is mandatory for the be registered or regulated for fund-related third-party entity availing fund activities in its jurisdiction. Clause 107H allows a management services to be third-party fund manager to avail services even if registered or regulated in its home its parent is not engaged in fund management, jurisdiction, or if an unregistered leading to ambiguity. This creates uncertainty for entity intending to launch a fund FMEs and prospective clients about the eligibility with a Registered FME is eligible of new entities or subsidiaries that may not yet be under Clause 107H. registered but meet other qualifications. Clarification will aid compliant structuring of third- party arrangements. 91 107G(1) Request amendment to increase The current USD 50 million threshold forces fund the corpus threshold from USD 50 owners to set up their own FME once crossed, million to USD 200 million or which is commercially unviable and resource- suitably higher, and to provide an intensive for many sponsors, especially as funds option for continuity of third-party scale gradually. This also disrupts business management beyond the continuity and penalizes successful partnerships. threshold if both parties agree and FMEs often contribute significantly to fund regulatory compliance is performance and continuity benefits both parties. maintained Increasing the limit and allowing continuity would enhance commercial viability and relationship longevity. 92 32(2) Request amendment to reduce the The USD 150,000 threshold is high for most minimum investment requirement resident Indian investors, even sophisticated or from USD 150,000 to USD 50,000 high-net-worth individuals, limiting adoption of international diversification opportunities. Comparable jurisdictions (ADGM, DIFC) allow lower thresholds (USD 50,000), balancing accessibility and investor protection. Lowering the threshold will broaden participation without compromising safeguards. 93 77(1) Request amendment to reduce the The USD 75,000 threshold is a significant barrier minimum investment requirement for HNIs, young wealth creators, and for portfolio management professionals seeking international exposure. agreements from USD 75,000 to Reducing the minimum improves accessibility USD 25,000 while retaining investor protection, as FMEs and PMS providers still conduct suitability assessments.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 94 22(1) The list for temporary deployment of pre-first close monies may be overly restrictive. We propose allowing deployment in liquid debt securities or money market instruments where there is no lock-in and are redeemable without requiring prior notice. This will offer necessary flexibility while ensuring scheme liquidity. 95 23(3)(iii) Clarification on the language concerning follow-on investments can be provided for clarity. The contribution in any subsequent round should be explicitly limited to the extent that the post-issue beneficial interest (on a fully diluted basis) of the scheme in that investee company remains the same or does not exceed its pre- issue beneficial interest (on a fully diluted basis) therein, providing certainty for existing investment mandates. 96 40(1) To ensure the intent to cap FME and affiliate participation to 10% is clearly achieved, it is suggested to revise the language to specify limits for both close-ended and open-ended schemes based on the lower of a percentage of corpus or a fixed USD amount, subject to an overall cap of 10% of the corpus. 97 40(4)(c) A confirmation that any co- investment opportunities offered to the investors of a Fund of Funds (FoF) scheme through a separate class of units, in accordance with co-investment opportunities offered by the underlying schemes, will not disqualify the FoF scheme from availing the regulatory exception offered under this Regulation 40(4)(c). ThisS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) clarification is vital for structured FoF products. 98 7(5)(b) We would like to submit three Hiring for PO / CO roles in an upcoming suggestions given the complexity jurisdiction like GIFT City is challenging and ripe of this issue: with “chicken or egg” problems. Under such 1. We welcome the introduction of circumstances, FMEs have had to be creative in a certification to provide a establishing talent pools in GIFT City. In our case, minimum criterion for the KMP we took long-term HR actions that involved hiring role. However, we believe that the talented individuals and grooming / training them qualification experience for the 3 internally for them to grow into the CO role. years should be broadened and While we appreciate the regulator’s desire to should include consultancy setup objective criteria, our humble submission experience. would be that the various criteria be established 2. If the above is not possible, then in a manner whereby they collectively ensure the we would suggest broadening the exclusion of the least number of “edge” cases. definition of the 3 year experience We have attached to this email an illustration of to include “financial institution such an edge case in our instance – our CO work” vs. the current requirement candidate. He is an MBA with over 7 yrs of being employed at a financial experience including >1yr at the FME, ~2 yrs institution. handling tax compliance and provisioning work 3. If neither of the above can be for regulated European businesses (banks, done, then we would request that insurance and investment companies) and ~1yr pre-existing HR plans of FMEs are worth of regulatory knowledge management work evaluated on a case by case basis during his >6yr stint in a big 4’s tax compliance and “edge” cases are handled in a unit prior to joining the FME. manner that avoids instances of The justifications for our 3 suggestions are as talented individuals at the cusp of follows: PO/CO roles being made 1. We assume that a comparable certification redundant due to evolving course similar to what NISM offers onshore for regulations. SEBI AIFs will be introduced soon for IFSCA AIFs as well. In such a case, the qualification experience for a person clearing this coursework should be broad and also include consultancy experience. Consultants, including those in tax/compliance or in business have been some of the best sources of talent for the fund management industry globally. If one were to look at the senior leadership of several reputed funds in India, many of them have been consultants in their immediate prior jobs, and many such profiles would not qualify per the extant or proposed regulations. 2. The regulation counts experience “at a financial institution” but does not allow identicalS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) like-for-like work undertaken at an outsourced setup (either consulting or back office) for a global financial institution. E.g. someone doing AML or tax work at HDFC Bank India would qualify, but someone doing the exact same work for HSBC Singapore via back office in India would not qualify. We think this is both harsh, and a valuable, missed opportunity to retrain / elevate local talent. In fact, we think this should be an active job creation thesis at GIFT City - take diamonds in the rough in the domestic outsourcing industry and train them into higher value front office roles. Quality control / knowledge of regulations is already being addressed by the certificate exam process. Moreover, many fund houses onshore directly hired from consulting companies for their senior investing partners (sometimes the first hire starting the India operations of a global fund house) or as their heads of finance. These individuals would be ineligible even under the proposed regime. Finally, many fund houses in India are structured as advisors that are advising an offshore fund. Per extant regulation, these managers would also be considered to be consultants since they are technically unregulated. If the interpretation in such cases is that these entities are effectively “unregistered” investment advisors in India who might have otherwise been considered regulated in their foreign jurisdiction, then that benefit ought to also be accorded to other instances such as operations roles etc. as described above. 3. It would be unfortunate if talented individuals at the cusp of PO / CO roles owing to a long-term HR plan already under implementation are made redundant due to highly specific (and evolving) regulations. We would request some case by case grandfathering for existing FMEs in such circumstances, if the broader criteria itself cannot be reformed.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 99 132 An AUM exemption may be Since schemes may begin at US$3M, the fixed provided even for open-ended fees that custodians charge will make these restricted schemes schemes unviable. An AUM floor for other schemes will provide a scheme the flexibility to scale without the manager taking on these costs. If the Authority is concerned that the increased liquidity in open-ended schemes may create greater issues in the absence of a custodian, the AUM limit may be reduced – say, to US$50M. 10 132 The Regulation talks about Clarificatory provision is required to be added for 0 exemption in appointment of passing the benefit of exemption in appointment custodian for only ‘fund of funds of Custodian to funds which are investing in scheme’. It doesn’t address the underlying funds as well as making direct type of funds where investment is portfolio investments. in both funds as well as direct, hence clarification is required to be This ensures a consistent approach, avoids added for exemption. duplicative custodian appointments, and aligns Suggestion: In case a scheme with proportionality of risk and asset custody invests both in underlying oversight. schemes and makes direct portfolio investments, the requirement to appoint a custodian shall not apply in respect of the portion of investments made in underlying schemes, provided such underlying schemes have appointed an independent custodian. However, for the portion of AUM attributable to direct portfolio investments, the scheme shall be required to appoint a custodian if such AUM exceeds USD 70 million 10 7 FME Managing an AUM of at least For funds having hybrid investment strategy of 1 USD 1 billion, excluding AUM of investing in direct portfolio companies as well as ‘fund of funds schemes’, as at the through other funds in India or abroad, will be close of a financial year is required required to comply with this requirement before to appoint additional KMP, who they approach the actual limit of AUM of USD 1 shall be assigned with the billion excluding investment in other funds. responsibility of fund To address this issue, definition of fund of fund management. scheme should be amended to consider those As per the definition ‘fund of funds funds which invest at least 75% or more in other scheme’ means a scheme that schemes whether in IFSC or India or foreign invest in other schemes whether in jurisdictions as ‘fund of funds scheme’. IFSC or India or foreign Clarifying the exclusion prevents unintendedS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) jurisdictions. Our schemes which regulatory consequences, ensures fair treatment are investing in both direct across fund structures, and provides operational portfolio companies as well as clarity to FMEs. through SEBI registered AIFs are not covered in ‘fund of funds scheme’ definition. The current regulatory provision covers exclusion of AUM only for schemes qualifying as ‘fund of funds scheme’. However, no explicit guidance is available regarding schemes that partially invest through other funds (AIFs in India or abroad) but do not qualify entirely as fund of funds schemes. Suggestion: 1) Definition of ‘fund of funds scheme’ should be amended to consider those funds which invest at least 75% or more in other schemes whether in IFSC or India or foreign jurisdictions as ‘fund of fund scheme’. 2) Sub-Regulation 4) of the Regulation 7 of IFSCA (Fund Management) Regulations, 2025 may be amended to clarify that USD 1 billion AUM will exclude AUM of investment made in the other funds based out at India or foreign jurisdictions. Clarification may also be provided through FAQs for exclusion of AUM of investment made in the other funds based out at India or foreign jurisdictions, in case of GIFT fund is investing in both underlying scheme as well as direct portfolio investments. 10 31(3), We would like to submit that the In order to provide greater flexibility and to tackle 2 35(2) & proposed extended validity of the the dynamic conditions for the Fund raising the 47 (6) PPM should be “one year” instead extended validity of the PPM should be increased of “six months” to one year. We would like to submit that similar changes should beS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) replicated in Regulation 31(3) and 47(6). 10 7(5)(b) To make the framework more Ease of Doing Business 3 inclusive and effective, we recommend to reduce the The minimum experience requirement of three minimum experience requirement years may still pose a significant barrier to to one year. onboarding capable and qualified professionals, particularly those who possess strong academic Provided also that individuals with and professional credentials in compliance, law, a post-qualification experience of or finance, have relevant certifications (e.g., CFA, at least 3 FRM, ICAI, ICSI, ICMAI). Such candidates gain (three) years 1 (one) year in a practical exposure through internships, training financial institution in IFSC, India programs, or short-term assignments in regulated or any foreign jurisdiction and who entities. holds a valid certification in such subject and awarded by such The recommendation of reducing the years of institution as may be specified by work experience from 3 to 1 year aligns with the Authority. IFSCA’s broader goals of promoting ease of doing business, talent development, and global competitiveness of GIFT City. 10 31(3) If a FME fails to achieve the Ease of Doing Business 4 proviso minimum size of corpus, as specified under sub-regulation (2) Requiring 50% of the fresh scheme fee again for of regulation 35, within the each extension, even after an initial exemption specified time period, it shall have fee has been paid, results in cumulative financial the one-time option to extend the strain. On the contrary, reducing the extension validity of the placement fee to 10% of the applicable fee ensures that fund memorandum for a further period managers are not penalized for delayed of 6 months by paying 50 per cent. fundraising timelines, which are often beyond (50%) of the fee as applicable for their control. filing of a fresh scheme. High extension fees disproportionately affect Proposed regulation: smaller or emerging fund managers, potentially Provided further that if a FME fails discouraging their participation in GIFT-IFSC. to achieve the corpus size of USD Reduced extension fees, on the other hand, will 3 Million within 12 months from the result in lower operational costs for fund date of communication from the managers, translating into lower fees and better Authority that the placement returns for investors. memorandum of the scheme has been taken on record, it shall have Reducing the PPM extension fee to 10% is a the option to extend the validity of balanced and pragmatic approach. It supports the placement memorandum for fund managers and aligns with IFSCA’s broader further period of 6 months, goals of promoting innovation, efficiency, and wherein each such extension shall investor confidence in the IFSC ecosystem. be filed to the Authority at suchS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) time when the placement memorandum is still valid and accompanied with a fee which is equal to 10 per cent. (10%) of the fee as applicable for filing of a fresh scheme. 10 7(5)(b) Employees of Gujarat We have been assisting both IFSC and non-IFSC 5 International Finance Tec-City entities in fulfilling all compliance requirements Company Limited (GIFTCL) who necessary for their establishment and are directly responsible for SEZ operationalisation within GIFT SEZ. Our support operations and compliance extends across the entire lifecycle of these stewardship—and who entities, ensuring sustained adherence to all consistently support IFSC units in applicable regulatory norms. Importantly, this meeting their regulatory responsibility has been undertaken even prior to obligations—should also be the establishment of the IFSCA, giving us considered eligible for the role of longstanding, practical exposure to the regulatory Key Managerial Personnel ecosystem governing SEZ and IFSC operations. (Compliance Officer) under the This depth of experience places us in a strong proposed framework. Over the position to contribute effectively in the capacity of years, this cadre of professionals a Compliance Officer under the proposed has developed deep, hands-on regulations. expertise in Fund Management Regulations, AML/CFT and KYC frameworks, SEZ regulations, and other allied regulatory requirements applicable to IFSC entities. Given this comprehensive and practical regulatory exposure, it is respectfully submitted that such experienced personnel should be afforded the opportunity to serve as Compliance Officers in Fund Management Entities, thereby strengthening the overall compliance ecosystem within the IFSC.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 10 7 We respectfully submit this The following rationale supports the proposal to 6 proposal requesting an grant Fund Management Entities (FMEs) initial operational easiness and flexibility regarding the appointment of Key concerning the appointment of the Managerial Personnel (KMPs) within the Compliance Officer (CO) and International Financial Services Centres Principal Officer (PO) for early- Authority (IFSCA) framework: stage Fund Management Entities (FMEs) operating within the IFSC. Optimizing Operational Efficiency and Cost This measure is intended to Management promote the growth of nascent FMEs and enhance the ease of Permitting a single Key Managerial Personnel doing business in line with the (KMP) to fulfil the combined roles of Principal Authority's objective of developing Officer (PO) and Compliance Officer (CO) during the IFSC ecosystem. an FME's nascent stage is a crucial measure for optimizing operational efficiency and reducing initial establishment costs. 2. Current Operational Challenge Regulation 7 of the IFSCA (Fund Newly established FMEs often operate with Management) Regulations limited capital and a restricted number of mandates the appointment of a operational schemes. Mandating two separate, distinct Principal Officer and highly compensated KMPs immediately places a Compliance Officer, which are significant financial strain that can hinder growth critical for robust governance. and competitiveness. This proposal offers a However, for FMEs in the initial scale-appropriate solution, allowing capital to be phase of their operations, which directed towards core business development are characterized by a limited rather than prematurely escalating administrative number of schemes and relatively overhead. lower Assets Under Management (AUM), the requirement to appoint two separate full-time Key Managerial Personnel (KMPs) often represents as challenging to get suitable candidate, disproportionate operational and unsatisfactory for highly experienced KMPs. 3. Single-KMP Structure for Early- Stage FMEs This proposal requests the International Financial Services Centres Authority (IFSCA) to permit Fund Management Entities (FMEs) an initial flexibility regarding the appointment of KeyS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) Managerial Personnel (KMPs). Specifically, we propose allowing FME to operate with one KMP during its early developmental stage. Since initial-stage, FMEs with limited activities, the role will be disproportionate and unsatisfactory for highly experienced KMPs, as the volume of work does not match their calibre. Therefore, the single-KMP structure would remain in effect until the FME achieves a significant scale, defined as reaching USD 1 billion in Assets Under Management (AUM) or having successfully established and operationalized four to five schemes within the IFSC. Upon meeting either of these specified growth thresholds, the FME will have regulatory requirement of appointing two separate KMPs (a distinct Principal Officer and a distinct Compliance Officer). This targeted, scale-based exemption aims to optimize operational efficiency and reduce initial establishment costs, thereby encouraging greater participation and faster growth of fund management activities in the IFSC.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 10 7(5)(b) The requirement of KMPs to be As a developing financial hub, GIFT City has not 7 based in IFSC shall be relaxed till yet built a highly specialized talent for senior 31 Dec 2030. financial and compliance roles, especially those with relevant experience as currently required for We suggest that designated the GIFT IFSC Unit. employees can be employed by the Parent Company in mainland Experienced KMPs from the parent entity in the India and be allowed to be mainland India can quickly establish best appointed as KMPs in Gift city, practices, internal controls, and compliance with a condition of operating from frameworks in the new IFSC branch and it will IFSC branch office at least 5 days also provide an assurance to the IFSCA that the in a month. new entity is being managed by "Fit and proper" individual with a proven track record. The Principal Officer should be at least post graduate / professional The visit of an IFSC Branch for at least 5 days in degree (CA /CS/ MBA) with a post a month will ensure that the KMP are actively qualification experience of at least involved in management and decision making 3 years. and will invalidate any concerns of Shell entity operating from GIFT City. A biometric system can The Compliance Officer should be mandated as the primary method of validation either have postgraduate with of presence of KMP in GIFT City based office of relevant experience in financial the Regulated Entity. sector or Legal / Compliance role for 3 years or have a professional degree (CA /CS/ ICWA).S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 10 19(3) The Initial Validity Period of PPM A key factor in any Investment Manager's 8 and taken on record should be planning is the unpredictable nature of the global 31(3) increased to three years (currently market. One needs to account for the risk that 12 months). Further, an extension attracting capital may be subject to prolonged should be allowed for a further delays during periods of market instability, period of two years by paying requiring a flexible holding period. If the cycle is minimum fees of USD 500 instead not in favor 12 months become too short a period of current six months and 50% of new managers to raise capital from investors. fees. A three year period with some extension flexibility This amendment should be gives enough time to raise capital. applied retrospectively, covering the six-month period preceding 50% of fees for extension is prohibitive in nature this notification where the initial as the fund is yet to start and it is a meaningful compliance deadline and its expense while not earning any revenues. Also the extension had already elapsed. six month extension window is quite short as some time already is lapsed in completing the procedural formalities of taking the extension, so the FME gets a much shorter window compared to the six month window. SEBI grants a 3-year license to any FPI/ PMS getting themselves registered with SEBI, similar timelines should be kept for IFSCA FME licenses to start the business with extension possibilities. 10 35(1) & The limit of minimum USD 1 This will allow FMEs to immediately deploy the 9 (2) million for first close be relaxed initial capital into investments and thereby not let and reduced to USD 150,000. any investors to wait for other investors to join. A fund cannot compute a credible NAV or demonstrate performance until it has officially launched and invested capital. By lowering the limit, the fund can start investing sooner, compute an actual NAV, and thus create the performance data that larger global investors require before committing significant capital. To raise funds from global investors, disclosure of NAV reflects the track record of scheme’s performance. A longer tenure track record is one of the key aspects prospective investors consider while evaluating any offering. It is an imperative measure to improve the ease of doing business by allowing IFSC funds to quickly move from the formation stage to the operational stage.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 11 132 The condition to have service Global investors prefer having service providers 0 providers like Custodian and Fund like Custodian and Fund Administrators with Administrator based in IFSC be global capabilities. Most of the global Custodians relaxed and allow if such parties and Fund Administrator now operate with Global are registered with SEBI/RBI. Capability Centres to get efficiency in the Alternatively, the registration of operations and minimising costs charged to the entities should have flexibility of investor while providing better services. India operations in mainland with already has many of these GCC operational, by adequate oversight and not allowing these centres to take GIFT City governance mechanism related work is a big hinderance for the growht of this sector in India and thereby impacting job creation. Further the global expertise, best practices, infrastructure of these GCCs can be leveraged for GIFT City based Funds usage making them at par with global offshore funds in terms of costing, service quality, timeliness etc. 111 19(3) Revised insertion (suggested The reduced fee / increased validity approach & 31(3) wording for 19(3) proviso): addresses the same commercial problem: fund- Provided that if a FME fails to raising timelines are uncertain and numerous achieve the minimum size of extensions at high cost increase operational corpus, as specified under sub burden. regulation (1) of regulation 23, within the specified time period, it shall have the option to extend the validity of the placement memorandum for a further period of six (6) months, wherein each such extension shall be filed to the Authority at such time when the placement memorandum is still valid and accompanied with a fee which is equal to by paying ten per cent. (10%) instead of 50% of the fee as applicable for filing of a fresh scheme or by paying twenty-five per cent. (25%) of the fee as applicable for filing of a fresh scheme for a further period of 12 months.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 11 19(3), Define the term "first close". Multiple provisions reference 'first close' but a 2 22(1), precise statutory definition is missing; defining it 27(1), Suggestion: We request you to ensures consistent triggering of disclosure, NAV, 34(1), please clearly define the meaning valuation and fee-related obligations and avoids 39(1), of first close for close ended operational uncertainty across FMEs and filings. 46(1) & scheme and open-ended scheme Third as there is no first, second or last Schedule close in open ended scheme. (first close referenc es) 11 35(2) The minimum size of corpus of the For EODB, we request the removal of the 3 and restricted schemes shall be USD 3 minimum corpus requirement for the Fund. 47(6) Million: Typically, investors initially commit a small amount to assess the Fund’s performance and Provided that an open-ended review its historical track record before making scheme may commence larger investments. investment activities upon raising at least USD 1 Million in funds and Allowing the Fund Management Entity (FME) to shall achieve the minimum corpus launch the fund immediately upon IFSCA of USD 3 Million within 12 months approval—without waiting to meet the minimum from the date of communication corpus requirement—will help attract more from the Authority that the investors and expedite fund operations. placement memorandum of the Moreover, investors generally prefer to deploy scheme has been taken on record. their capital once the fund becomes operational, rather than keeping their money idle while waiting for the fund to meet the minimum corpus threshold. 11 35(2), One time extension of up to 6 This tiered fee structure balances the need for 4 47(6) months may be granted upon regulatory oversight with the practical fundraising payment of a reduced fee timelines of FMEs. It provides cost effective equivalent to 25% of the fee flexibility for initial extension while discouraging applicable for filing a fresh scheme indefinite delays through higher fees for subsequent extensions. Any further extension beyond the initial 6-month period may be permitted with a fee equal to 50% of the applicable fee for filing a fresh scheme. This proposal should also be implemented on similar lines for extending the validity of the offer document for Retail Scheme.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 11 35(2) It should be clarified that, whether This will ensure regulatory clarity. 5 open ended scheme can take commitment amount in drawdown/tranche manner. Also, if that is allowed then amount of USD 1 Million refers in this regulation should be clarified, whether it refers to corpus or amount received in the scheme bank account. 11 7(2) We seek your suggestions for the Fund Management Entities (FMEs) face 6 Fund Management Entities difficulties in appointing Compliance Officers (FMEs) to also appoint an Ancillary (COs) with the requisite experience in the field, Service Provider authorized to as stipulated. International jurisdictions like the provide Compliance Services as DIFC, Singapore, Hong Kong, Cayman Islands, the Compliance Officers (COs) and the British Virgin Islands permit the with the sufficient people recruited outsourcing of compliance officers (COs). These with requisite experience in the jurisdictions typically require licensed authorities field, as stipulated by Regulation to be appointed as COs. Additionally, IFSCA- 7(5)(a) and (b). registered ancillary service providers can be appointed as COs for multiple funds. To ensure effective oversight, it might be beneficial to impose a limit on the number of funds a single CO can manage. 11 132 We welcome the importance As a custodian, we have received positive 7 accorded by the Authority to the feedback on this proposal permitting FMEs to role of custodians and support the appointment of an independent custodian in India change in proposed regulation or any foreign jurisdiction which is regulated by permitting appointment may be the financial sector regulator in that jurisdiction. made within twenty-four (24) The arrangement to provide such information to months from the date of Authority whenever directed to do so would notification of the amended continue for the next 24 months from the date of regulations notification of the amended regulations. We request IFSCA to seek feedback from custodians and FME on making this provision permanent in nature as it will lead to ease of doing business. 11 132 There is need to define 'AUM' or Since there is no specific definition in the 8 the reference may be given to regulations. 'Corpus' of the schemes.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 11 19 (3) 19 (3) The placement • The fees for PPM filing at IFSC seem to be quite 9 memorandum for launch of the high Venture Capital scheme shall be • IFSC charges a fee of 22500 $ (Cat III valid for twelve (12) months from Restricted Scheme, Retail Scheme & ETF) as the date of communication from compared to SEBI which is at Rs. 100,000/- (for the Authority to the FME that the each new AIF scheme). placement memorandum has • To charge another 50% for extension seems too been taken on record, during high and makes costing unviable which period the FME shall • We would recommend the first extension to be declare the first close of the without any fees and subsequent extension may scheme by achieving at least the be 5% of the original fees minimum size of corpus as • The above is also relevant for the Restricted specified under sub-regulation (1) Schemes (Pg. 28 – 2 of Annexure II of the of regulation 23: Consultation paper; and Regulation 31 (3)) & Provided that if a FME fails to Retail Schemes (Regulation 47 (6) Second achieve the minimum size of proviso), of the existing FME Regulations corpus, as specified under sub regulation (1) of regulation 23, within the specified time period, it shall have the one-time option to extend the validity of the placement memorandum for a further period of six (6) months, wherein each such extension shall be filed to the Authority at such time when the placement memorandum is still valid and accompanied with a fee which is equal to by paying fifty per cent. (5%) of the fee as applicable for filing of a fresh scheme from second extension onwards.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 12 7(5)(b) Proposed clarification: Insert / Regulation 7(5)(b) currently limits consultancy 0 delete the following edits in orange experience in areas related to fund management, in Regulation 7(5)(b). such as deal due diligence, transaction advisory Proposed Insertion: or similar activities. This creates issues for FME “7(5)(b) In addition to the in hiring the personnel. Hence, we recommend to qualifications mentioned under consider expanding qualifying consultancy clause (a), an experience of at experience to all Qualifying Experience Activities least five (5) years in related and not just those in relation to “fund activities in the securities market management”. or financial products including in a portfolio manager, fund manager, Additionally, there is a general ambiguity in the investment advisor, broker dealer, distinction between “experience” and investment banker, wealth “consultancy experience”. The Regulation does manager, research analyst, credit not clearly articulate the scope of “experience” rating agency, market and how it is differentiated from “consultancy infrastructure institution, financial experience.” While consultancy experience is sector regulator (collectively, defined to include “areas related to fund “Qualifying Experience Activities”), management, such as deal due diligence, or consultancy experience in transaction advisory or similar activities,” in areas related to such Qualifying practice consultants may also be engaged on a Experience Activities (and not full-time basis in Qualifying Experience Activities. limited only to fund management), such as deal due diligence, Experience – Issues: transaction advisory or similar It is unclear whether “experience” is limited to activities (“Qualifying Consultancy employment experience. If so, this may restrict Activities”): individuals such as directors or partners of Provided that where an entities engaged in Experience Activities. In individual’s engagement is in the group company contexts, an individual may be nature of consultancy (including employed by one entity but seconded to another self-employed or project-based engaged in Qualifying Experience Activities as a consultancy services) in any of the consultant. Thus, consultancy engagement Qualifying Experience Activities, should not automatically be considered lesser such the consultancy experience than employment. in areas related to fund management, such as deal due Consultancy Experience – Issues: diligence, transaction advisory, • It is unclear whether consultancy experience is etc., shall be considered for a only intended to cover self-employed individuals maximum period of two (2) years or also part-time / project-specific engagements. and the remaining period of • It is not clear why consultancy services are experience in other areas as limited to “fund management” while Qualifying mentioned in sub-regulation (b) Experience Activities have a broader scope. For shall be required in other instance, deal due diligence is typically also Qualifying Experience Activities undertaken by investment bankers, portfolio for at least three (3) years: managers, and investment advisors. Provided further that for the KMPS. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) referred under sub-regulation (2), Two interpretations could arise from the current the experience mentioned in language: clause (b) shall be required for a i. only consultancy activity related to fund minimum period of three (3) years, management will be restricted to two years, while if such KMP possesses a consultancy in other Experience Activities will professional qualification and has count fully; or experience in compliance or risk ii. only consultancy activity in fund management management in a listed company will be counted, excluding similar activities (like or an entity regulated by a financial deal due diligence) when undertaken by an sector regulator. Investment Banker Explanation. – For the purposes of this regulation, the professional qualification shall include membership of Institute of Chartered Accountants of India, Institute of Company Secretaries of India, Institute of Cost Accountants of India or any institution equivalent thereto in a foreign jurisdiction, and for KMP referred under sub-regulation (2) it shall also include Bachelor of Laws (LLB) from a university or an institution recognised by the Central Government or any State Government or a recognised foreign university or institution or association. 12 19(3) Retain unlimited extensions but Some fundraises, particularly first-time funds and 1 and modify fee structure: sector-focused strategies, require longer 31(3) Suggestion: The first extension (6 gestation. A fee-neutral first extension months) should be at no charge, encourages early-stage fund incubation while and subsequent extensions subsequent paid extensions maintain regulatory should be charged a 50% fee for discipline. each such extension.S. Regulati Comments / Suggestions Detailed Rationale No on No. (along with revised text in line with the (along with supporting information) suggestion) 12 132 Appointment of custodian The requirement of custodian for unlisted 2 For close ended schemes which securities in dematerialised form is not adding are investing in unlisted any value as securities are already tracked by dematerialised securities in India way of ISIN and movement inward or outward in and in unlisted offshore securities demat accounts. Also, proper execution of demat instructions is a condition precedent for both seller and buyer funds in secondary transactions. Therefore, the interests of investors are very well secured. As such the custodian in such a case adds no value but only cost and consumes bandwidth for team which even investors do not appreciate. There are funds in GIFT which invest in unlisted securities issued by foreign companies. Indian and GIFT custodians have categorically expressed inability as well as lack of legal powers to exercise restraint on transfer of such securities as such securities are governed by the laws of the country of the issuer company. Thus, our humble request is to remove the requirement of custodian for closed ended VC and restricted schemes for achieving real EODB. 12 AML/CF Request that the designation The term “Principal Officer” is used both in FM 3 T “Principal Officer” under AML/CFT Regulations (Clause 7(1)) and AML/CFT Guidelin Guidelines be revised to “MLRO” Guidelines (Clause 8.2), causing confusion in es, and that the Compliance Officer governance, role allocation, and reporting lines, Clause can act as the MLRO. particularly for smaller FMEs. Globally, the officer 8.2 responsible for AML/CFT compliance is called the Money Laundering Reporting Officer (MLRO). Updating the terminology will eliminate ambiguity, enable clearer internal compliance structures, and align IFSCA regulations with international standards. IFSCA Response: During the public consultation, comments were received from various stakeholders. The proposals were suitably modified based on the comments received from the stakeholders and recommendations of the Fund Management Advisory Committee. The revised proposals were placed before the Authority in the meetings held on December 22, 2025, and July 24, 2026. The comments received from the stakeholders were also placed before the Authority.